The President’s budget will propose to limit retirement savings. The budget would limit an individual’s total balance across tax-preferred accounts to an amount sufficient to finance an annuity of not more than $205,000 per year in retirement, or about $3 million in 2013.
That’s hardly a “millionaire or billionaire” as the budget language claims playing the same old class envy song. You see, to have a pension of $68,000 a year you would need a million dollars as well.
In addition, that $3 million cap and $205,000 goal does not include the cost of survivor benefits. To provide a survivor benefit you would need $3.6 million assuming your spouse is the same age and that neither benefit begins before you reach age 65.
“Sets limits on tax-preferred retirement accounts for millionaires and billionaires: The budget will also show how we can provide targeted tax relief to strengthen the economy, help middle class families and small businesses and pay for it by eliminating tax loopholes and make the tax system more fair. The budget will include a new proposal that prohibits individuals from accumulating over $3 million in IRAs and other tax-preferred retirement accounts. Under current rules, some wealthy individuals are able to accumulate many millions of dollars in these accounts, substantially more than is needed to fund reasonable levels of retirement saving. The budget would limit an individual’s total balance across tax-preferred accounts to an amount sufficient to finance an annuity of not more than $205,000 per year in retirement, or about $3 million in 2013. This proposal would raise $9 billion over 10 years.”
Real millionaires and billionaires probably don’t need any government plans, but the rest of us do. Keep in mind that none of this money is tax free, but deferred until age 70 1/2. In addition, when withdrawn it is taxed as ordinary income. During the last election all we heard was about Buffett and Romney and others paying low effective tax rates. That was not because they had retirement savings that grew to millions, but because their current income was from capital gains and dividends. In fact, their tax rate would likely increase as retirement savings are withdrawn.
QUINNSCOMMENTARY 
I suspect the proposal will simply tax accumulations in excess of $3MM – effectively removing the tax deferral aspect of retirement plans. So, Roth may be a solution, up to $3MM, but obviously, people will remove money from their retirement plans and invest elsewhere – subjecting the earnings to taxes at that point.
Seems misguided, because the issue highlighted by President Obama is a concern that individuals with significant wealth are paying lower rates than regular wage earners. Since these monies are all taxed as ordinary income (excluding Roth and a modest exception for certain employer owned securities), just isn’t clear what he is attempting to achieve, since the revenue will be, at best, minimal…
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“The budget will include a new proposal that prohibits individuals from accumulating over $3 million in IRAs and other tax-preferred retirement accounts…. It will be interesting to see what the definition of accumulating means. Will it mean no new contributions after the limit is reached or will growth of the account also be limited. This will be especially important to Roth IRAs where tax has already been paid,growth is not taxed and there are no mandatory distributions.
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I don’t see how it’s possible to accumulate millions simply by normal contributions given the IRC limits already in place. It would have to be either or both earnings and rollover amounts. It would appear prudent saving and investing is penalized for people who are hardly in the millionaire and billionaire class. If that is the goal why not simply preclude anyone with an income of one million or more from using IRAs,, etc. period?
I knew a very average employee who was a savy investor trading every day in his 401(k) who accumulated $2.5 million in just under four years.
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Come on Quinn – get real! – with the DOW at all-time highs, the most prosperous corporations and their executives are reaping huge earnings, salaries and bonuses – they have trillions of dollars stashed in off-shore accounts to avoid paying taxes to this great nation that gave them the opportunity to become obscenely wealthy – they are not investing their profits in America to create more jobs – and, they still get tax breaks for company planes, etc.? – big oil companies are achieving record profits and are still receiving tax breaks? – if they were paying their fair share of taxes, our economy would have recovered by now – open your eyes, Quinn – the rich are getting richer than ever before and “trickle-down economics” is not working, it never has and it never will! – Republicans trumpet “deficit reduction”, but the facts are that deficits have risen during Republican administrations and deficits have been reduced during Democratic administrations – fact check that! – it is way past high time for the Republican House Representatives, who have dedicated all of their waking hours to obstructing a half-black president from accomplishing any good for the American people, to get out of the way and ask, “What can I do for my country?” – these Republican House Representatives are racists elected by racists in gerrymandered state districts and they are destroying a great nation in order to retain their congessional offices – they are totally disgusting and despicable human beings!
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