Posted on 02/02/2015 10:45:29 AM PST by abb
With the release of its 2016 spending blueprint Monday, the Obama White House officially signaled its intent to use retirement policy to raise taxes on the wealthiest Americans.
The proposed 10-year budget, which allots $4 trillion in spending for fiscal year 2016, will attempt to cap tax-deferred saving in 401(k) and Individual Retirement Accounts at about $3.4 million.
That amount of savings generates more than $200,000 of income annually in retirement when annuitized, an income stream that should be sufficient for most, according to the Obama administration’s rationale behind the proposal.
The vast majority of Americans would never feel the cap. In 2011, only one out of every 1,000 Americans had more than $3 million in their retirement accounts, according to the Employee Benefit Research Institute. That said, many in the industry oppose it, especially in light of concerns over rising interest rates.
“Politically, it is convenient to target people who have saved $3.4 million,” Klein said. “But the devil is in the details when you look at the impact on younger workers and the inevitability that interest rates will rise over the coming decades.”
The problem is that annuity prices vary with interest rates because insurance companies buy bonds to finance pay-outs. When bond yields are low, as they are now, annuities are more expensive. Right now a 10-year Treasury bond yield is just 2 percent. If it jumps to 5 percent (the rate in 2006), that $205,000 annual annuity would only cost $2.2 million. .
The cap is a relatively small gambit in the budget’s larger effort to raise revenues by increasing capital gains taxes, inheritance taxes, and taxes on foreign revenue streams of U.S. multinational companies. Related 13 things on the IRI’s regulatory agenda
A possibly overreaching fiduciary standard is just one of many items the organization will lobby on in the coming year.
The budget also purports to stimulate middle-class incomes with a series of spending initiatives and tax cuts.
New retirement regulations in the budget would also make it easier for workers to save for retirement through their employers by giving 30 million more workers access to IRAs in which they are automatically enrolled, according to a fact sheet published on the White House’s Office of Management and Budget site.
Good idea!
Yes, but more importantly, he is trying to undo everything that Kemp-Roth-Reagan did to empower a group of Americans that have been called by the likes of Larry Kudlow "The Investor Class".
You can see the Occupant of 1600 something or other truly reviles Reagan and everything he stood for in regards to American Exceptionalism, and getting Gov't the h@!! out of the individual and letting them find their own way and excel.
It is time something be done about this.
You probably have, O-dey, sell your house in Hawaii and Chicago and take your daughters out of private school. That’s make you a few million $$$ closer to us citizens paying your wages.
What a jerk.
“The vast majority of Americans would never feel the cap.”
The limitless Federal printing of unbacked paper money will eventually cause hyperinflation. When that happens, we will all become millionaires (or worse) and thereby subject to the cap.
Any kind of inflation will do the trick.
A 1984 dollar is worth $.44 in 2014. Assuming the same rate of inflation for the next 30 years, the $3 million has to grow to be $6.8 million to have the same purchasing power.
Another bad idea from the worst administration of my lifetime.
“We’ll have to accept this because we don’t have the votes. We’ll change it back once we’ve won the White House.” - Republican response.
This dude must have lost his damn mind.
Nope. This dude was re-elected. And he has no opposition.
Well, yes, there is that option, isn't there?
If they get it, they’ll pull some BS like with the AMT (Alternative Minimum Tax) and with Social Security taxation, where they “forget” to index it for inflation, or something similar.
0bama Budget:
D.O.A.
See Social Security taxation, too. That's not indexed for inflation, either. Another "unfortunate mistake" by our CONgressthieves...
Plus, Social Security taxation is not indexed to inflation, just like the AMT! (it's in the article)
Already happened. DW and I get taxed on 85% of our SS “benefit” now, and we are hardly in the upper 1%.
The original promise was that SS “benefits” would be non-taxable!
Love your effing government, because your government loves effing you!
In reality those of us with income over the limits you cite get multiple hammering.
My company gave me a good early retirement package @ the age of 56.
The catch was when you turned 62, they deducted that from your monthly pension.
I had good consulting gig and made any where from $500/1000 per week.
When I went on social security at age 62, our CPA told me to quit the consulting gig and work on preserving our IRA s.
My wife complained, and our CPA told her to get Homer bucket and once a month fill the bucket with 10 to 20 dollar bills and sit in the back of my pickup and toss the money out due to the taxes.
So I quit my consulting and the SS fund lost my double contributions as an independent contractor.
They have to go to where the money’s at. The meat is in the middle.
Soros wants to destroy the dollar, too—so that 3.4M would generate a poverty-level income stream…
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.