Re: Capping IRA's
posted at 4/9/2013 7:09 AM EDT
In response to bald-predictions' comment:
Couple of thoughts.
I can't say that I'm a big fan of this idea
The multimillion-dollar retirement accounts favored by Mitt Romney are on the outs in the new budget proposal from President Barack Obama.
The president's budget plan, expected to be introduced next week, would ban anything above $3 million in individual retirement accounts, Bloomberg
. Because those accounts get some key tax breaks, capping them would generate about $9 billion in revenue for Uncle Sam over the next 10 years.
Obama is essentially asking people this: How much do you really need for retirement? Some wealthy people are socking away millions in these accounts, much more than they actually need, the White House said in a statement.
A White House official put it this way to
: Obama's proposal caps retirement accounts at an amount that would provide someone about $205,000 per year in retirement.
You could put as much as you want in your
) savings account or other accounts. It's just the tax-favored retirement accounts that are being scrutinized here.
As it stands, some retirement accounts are so loaded that people are using them more for estate planning. One accountant told Bloomberg that the wealthy are using retirement accounts to pass money to heirs in a tax-friendly way.
The White House isn't mentioning Romney by name, but his IRA was in the public spotlight last year. At one point, the account exceeded $100 million. Most taxpayers are limited to a $5,500 contribution for 2013, Bloomberg reports.
So far, Obama isn't saying how he plans to cap IRA amounts. The $3 million cap would apply to the total of all of a person's tax-favored retirement accounts, not a single account.
If you know a financial planner that can throw off 205,000 from 3 million reliably, that person has superpowers and likely does not need your retirement money to secure his/her own retirement. Everything I hear is that 4% is a more typical number, or about 120,000. In today's environment, a secure return is likely much lower.
This year, the limit is 3 mil. Future years? Who knows. Maybe the government needs a little more to fund food stamps, so the limit goes to 1 mil.
This law doesn't limit the super rich, they can move their money at will and have people watching these things. What this does is it lays down a marker for going after the IRA's of the less wealthy.