Obama's Budget Would Cap Retirement Accounts

[bjl584]

http://business.time.com/2013/04/10/obamas-budget-would-cap-tax-advantaged-savings/

"Some of us have worried for decades that when America’s tax-advantaged savings pot got large enough, our perpetually revenue-challenged federal government would raid the nest egg. All that untaxed growth would simply prove irresistible. That day may be at hand."

[Wino]

I say that this is great. Let's see what the government pension system equates to as if it were an IRA, and tax those accordingly, as well. Tax their pension when they are working, then tax it again when they retire.

Sauce for the goose should be sauce for the gander.

[phantom]

What exactly does a cap on tax-advantaged savings mean? I read the article, but I couldn't figure that out. Other articles I found on the topic seemed equally vague, and I couldn't find a link to the actually language of the proposal. How would it work? Once an individual hits 3 million across all retirement accounts, does he have to stop contributing or does he have to withdraw the excess? Is this number indexed to inflation or does is it still going to be 3 million 30 years from now?

Never mind, I found the closest thing I'm going to get to an answer here:

The administration hasn’t explained how the cap would work. Officials haven’t said whether they would tax existing balances above $3 million or prevent people from adding more money to their accounts once they reach that amount.

The White House also didn’t say whether the limit would be indexed for inflation or whether it would affect defined-benefit pension plans. While such plans pay benefits over time, their present value also can be calculated in a lump-sum amount.

[GrimJack]

I do not understand how someone can amass 3 million in an IRA (let alone Mitten's 100 million) - I know compounding is a wonderful thing but using bankrate.com calculator contributing 2k per year from age 21 with an 8% rate of return only produces 1,100k. I get lost on some of these calculations so help me out here.

[bjl584]

I do not understand how someone can amass 3 million in an IRA (let alone Mitten's 100 million) - I know compounding is a wonderful thing but using bankrate.com calculator contributing 2k per year from age 21 with an 8% rate of return only produces 1,100k. I get lost on some of these calculations so help me out here.

The only things that I can come up with off the top of my head would be if someone rolled over a 401K into an IRA, or if someone that is a very sophisticated investor was able to have massive returns within an IRA by playing options.

[moneybags]

I would prefer they leave my 401k as is. If they are concerned about taxing it, make it taxable upon my death. It could serve my purpose during my life, and the government could get their taxes after that.

[GrimJack]

The only things that I can come up with off the top of my head would be if someone rolled over a 401K into an IRA, or if someone that is a very sophisticated investor was able to have massive returns within an IRA by playing options.

d'Oh! Of course, contributing to both a 401k and an IRA then rolling the 401k into would easily get to 3 million - thanks. But it would still take time and dedication.

[Gailete]

contributing 2k per year from age 21 with an 8% rate of return only produces 1,100k

$2000 a year for an IRA is an old number. This year (2013) someone who is over 50 can contribute $6500 and someone under 50 can contribute $5500. This depends on their income as well. But the contribution level has been climbing for years.

I haven't read the story yet, but my brain shuts down when millionaires try to cap retirement funds for middle class and higher Americans (the only ones for the most part that might hit $3 million in a retirement account) at a level. Sort of like them saying. No matter how hard you try, you aren't going to be allowed to have the kind of money the rest of us millionaires have.

Now that I am in my 50's and with early SS due to disability, I'm actively looking for ways to jack up our retirement funds for both myself and my husband so have been reading a lot and one thing I'm sure of, in 20-30 years $3 million is going to be the minimum that people need stashed away to retire to a 'comfortable' retirement (nothing lavish) that will cover their housing and medical needs. Unfortunately I'm not sure we are going to have a 'comfortable' retirement at all, no matter how frugal I am and have been over the years.


Remember it is every Americans right to try to become a multi-millionaire if they so desire and want to work and invest to do so (not saying we can make it), but it is our right to try.

[bjl584]

Oops forgot to mention. Those same people are also eligible to contribute the same amounts to Roth IRAs. So about $13K a year for over 50's and $11K for those under 50 total. I believe is what is current today.

You can only contribute a TOTAL amount annually of $5500 or $6500 between either a traditonal IRA or a ROTH IRA.

[Gailete]

Thank you Brian for that correction. I have edited my post. It should be that a husband and wife can can contribute a total of between $11-13K depending on their ages, income, etc. per year into IRA' or Roth IRa's.

[bjl584]

Thank you Brian for that correction. I have edited my post. It should be that a husband and wife can can contribute a total of between $11-13K depending on their ages, income, etc. per year into IRA' or Roth IRa's.

That's true. A couple can do that. An individual however can only contribute a max of $5500 or $6500 per year between both accounts. I wish that limit would be raised to match the limits of 401K's. But, in this cash strapped era of government I don't see that happening.