Essentially, the Obama Budget wants to cap the amount that can be kept in any tax deferred retirement account at at 205k annuity amount. Today that would be about 3mil in an account. In 2006 it would have been only 2.2mil. Obama justifies this by saying that it only effects a very small amount of the population (which is true) but that number is a bit misleading considering that basically anyone under 45 is not going to have that much in a tax deferred account no matter how much they make. So we are essentially just discouraging tax deferred savings in the long run. Anyways, here's the link: http://blogs.marketwatch.com/encore/2013/04/10/obama-budget-would-cap-i…
Thoughts?
This is old. But I respect Obama. I didn't think I could despise him any more than I already do, but he just upped the ante. Respect.
I heard about it but I never really understood what the proposal was. Okay, so they cap it at $2 million or whatever. Does that mean that, if enacted, someone like Mitt Romney would have to distribute all but $2 million of his IRAs to get under the "cap"? Or would it be like a penalty assessed on amounts over and above the $2 million, in a similar manner as excess contributions are?
Or, is it only for future earnings? For example, if you're IRAs are at $1.99 million and it gains another $100,000, do you have to take a distribution in order for the IRA balance to be under the $2 million?
It just sounds like bad policy all around. Plus it only get like, what, $8 billion over 10 years? That's reduces less than 1% of our current deficit, over the span of 10 years. Stupid.
This would be an interesting one to see them implement. What about illiquid, hard to value assets? What if you had a blockbuster year and your 401(k) doubled from $2mm to $4mm? Are you then forced to liquidate the assets because your account over-performed? I can only imagine that this would be one very complex piece of legislation...
Also, I imagine any tax savings would likely be a one-time occurrence as the Mitt Romneys of the world transfer assets around. Going forward, anyone with that kind of wealth would place and grow their money differently.
wtf... I thought this was only for IRAs. They're doing it for 401k's too?? Okay, this definitely won't pass - Not worried since most of congress is millionaires.
Also, anybody wanna mind-fuck me and tell my why Obama is tackling the deficit by going after "only a very small amount of the population"? $100 to whoever says something that isn't completely retarded.
The Democrats lose votes if he goes after the little guy. Going after the big guy won't hurt them politically in any way.
I believe it's only for IRAs, not 401ks (I was the one who wrote the first piece on this). Thing is, this makes the whole idea far stupider then if it applied to all retirement accounts. This whole idea came about from Mitt Romney's $100 million IRA that, apparently, outraged someone or another. But, really, the strategies that were employed to get an IRA to $100 million can be utilized to get a 401k to $100 million.
Impressive, right? You have to admit, it's very difficult to construct something this complex that will accomplish absolutely nothing it's intended to do.
The conceptual part of this was covered in the last thread on IRA caps. The whole point of IRAs and retirement accounts is so that people are encouraged to save enough to live decently in retirement. What they are not for is building a fortune tax free. So that's the theory driving this action.
I'd like to see tax rates lower overall to begin with, so the tax benefit of an IRA shouldn't have so much power in the first place. Really, the gov'ts "solution" to their crappy social security racket is to...not tax a personal account? That's the best our gov't can do? I'm not impressed.
My personal issue, I disagree with putting a fixed $amount cap, it should be function of average income. Gov't programs are terrible for keeping themselves relevant in the face of inflation. When the IRA tax structure was first created, $5,000 was 'more' wealth...now it's less and the cap should be raised.
Example: in 1975, average houshold income was $49,946 so $5,000 was 10% of income. In 2009, average household income was $70,544 so $5,000 was 7% of income. So, for this program to be as effective as it was in 1975, the standard individual cap should be raised to 7 grand. The gov't is too (fill in the blank) to regularly update its systems and keep them relevant.
Source: http://www.census.gov/compendia/statab/cats/income_expenditures_poverty…
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