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Obama proposes capping IRAs

By Jennie L. Phipps · Bankrate.com
Wednesday, April 10, 2013
Posted: 5 pm ET

President Barack Obama unveiled his new budget Wednesday, and it included a proposal to cap retirement savings at an amount that would yield an annual annuity payment of $205,000. In today's annuity market, that's about $3 million.

You might recall that last August, in the heat of the presidential campaign, critics bashed Republican candidate Mitt Romney for having what they estimated to be $100 million in his individual retirement account. This Obama proposal is obviously an effort to prevent zillionaires like Romney from amassing that kind of money without paying tax on much of it.

What you should know about social security benefitsFor the most of us, this proposal seems like a big shrug. The Employee Benefit Research Institute, or EBRI, reported that its IRA database at year-end 2011 showed that 0.03 percent of the approximately 20.6 million accounts had more than $3 million in assets. Some people have more than one of these accounts, so in all, 0.06 percent of the total number of account holders and 0.11 percent of account holders who are age 60 or older have more than $3 million saved in tax-advantaged accounts.

It's true that younger workers could feel the impact of this proposal more than those at or near retirement. Looking at the accounts in its database of workers 26 to 35 and assuming "no change in asset allocation over their future careers, real returns of 6 percent on equity investments, and 3 percent on nonequity investments, 1 percent real wage growth, and no job turnover," EBRI says just under 1 percent, or 0.9 percent, of these younger workers would hit the $3 million cap, after adjustments for inflation.

Are you worried yet? Some people are. A few pundits are predicting that this is only the beginning of a government assault on tax-advantaged retirement savings. The American Society of Pension Professionals & Actuaries warns that this change could discourage small businesses from offering retirement savings plans because the boss couldn't benefit as much as he'd prefer. Other pundits say this is a slippery slope and taxes on Roth 401(k)s could be next.

Will these things happen? Maybe, but, personally, I can find lots of more pressing retirement planning risks to worry about. I'm going to keep saving in hopes that I'll be lucky enough to have this problem.

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161 Comments
JonnyMayhem
April 27, 2013 at 9:08 pm

No, communist wouldn't take Obama. He is too big of a hypocrite. He is an elitist. He pays 18% in taxes in 2012 yet wants others to pay 35%???? You know what leading means??? Doing what you say, leading the way. He is a hypocrite, liar and deceiver.

David Brand
April 26, 2013 at 9:12 pm

...my guess is that Obama would be exempt. Funny how he seems to impose "what he feels is good and fair the the American public", but yet he won't do it himself. He's the biggest hippocrite I have ever seen, and deserves to be impeached for destroying our country.

max3333444555
April 24, 2013 at 10:45 pm

You know this is as math challenged as many of his other proposals, right?

the amount you take out of an IRA is taxed. if you limit what gets taken out all that happens is it stays in the IRA until you die and gets inherited - tax free.

any time I see Obama propose something that involves money it is always different than he present or not solving the problem he claims it does.

PugDad
April 24, 2013 at 8:33 pm

Can anyone say Robin Hood... Sure let's "rob" from the rich paying tax payers who employ thousands of Americans and "give" to the "entitled" or who Obama thinks is needy i.e himself. Lets see how that works out for the rest of America, my guess not so good. What motivation for success is this plan REALLY going to do.

J P V
April 24, 2013 at 7:31 pm

This whole idea ignores existing tax laws. IRA money is already taxed - when the account holder, or his/her heirs take the money out of the account. It's taxed as simple income, just like earned income. The account holder is forced by law to start taking minimum required distributions at about age 70.5.

All that will be accomplished by such a moronic restriction is to further stifle savings which builds capital for investments - which bolster our economy.

Jim
April 24, 2013 at 12:22 am

I guarantee you he and his woman can't live on $205,000 a year, nor will they try, laws are just for others, not his buddies and himself.

2nd-effort
April 23, 2013 at 5:32 pm

this is the typical elitist attitude. if he was serious about paying his fair share he would open his check book and send the irs a check for his other 17%. he would garner much respect among his peers i.e. walking the walk. but as with all liberal dems its i know what good for you but i'm exempt because i'm a gov official.

the race to Average
April 23, 2013 at 11:35 am

Typical reaction. But remember the words of the German pastor post-WWII who said (paraphrase), "First they came for the socialists, but I was not a socialist so I said nothing. Then they came for the Jews, but I am not a Jew so I said nothing. THen they came for me. But by then there was no one left to stand up for me.

If we're observers to the continued attacks of the liberties of other groups of people, then you'll have no one to blame when you become the next target.

shoemama
April 23, 2013 at 2:22 am

The real question is: Will HE submit to this limit on HIS retirement??? Remember how he castigated Romney for paying 15%?
Well he only paid 18% on HIS 2012 taxes. Is this what he considers fair?? Why doesn't he pay 35%??? There is no one stopping him from paying that much. Just because it is legal for him to pay 18% doesn't mean he can't pay more. Apparently, he doesn't consider himself as needing to "contribute" HIS FAIR SHARE. Apparently, it is "do what I say, NOT what I do". Does he know how to spell "hypocrite"??????

Kyle McKenna
April 22, 2013 at 11:27 pm

Yeah how dare that Obama try to tax multi-millionaires!

What is he, some kinda communist?