Obama budget proposes retirement savings cap

Benefits Pro ^ | February 2, 2015 | Nick Thornton

[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.

[Grampa Dave]

“They have to go to where the money’s at. The meat is in the middle.”

My wife and I are in our 70’s, and we have been gnawed on by the tax suckers all of our adult lives. They are past the meat and are going for our bone marrow.

It doesn’t get any easier when you retire.

[abb]

Mrs. abb is about to retire. I will be eligible for Medicare in a couple of months, but she’s several years away from that. We are going through our options for insurance now. Quite a chore.

[Grampa Dave]

Fortunately, we escaped that chore, so far.

[BeauBo]

Just like the income tax, which was supposed to never exceed 3% when it was passed.

This is just the camels nose under the tent to establish the precedent of setting a cap.

Once that control is in place, it will be used by leftists like every other economic control - to crush their bourgeois enemies of the middle class.

Lenin said that taxation and inflation were the millstones, between which he would grind the bourgeoisie.. Alinsky advised American radicals to pretend to be for the middle class, while destroying them.

Dictators want a subservient and dependent population, not a bunch of uppity independent types with their own opinions on things, and the resources to do something about it.

That is why the left is, and has long been, closing the doors for individuals to get ahead in life, and become independently wealthy. The common paths are being shut. Doctors are becoming virtual employees of the state under Obamacare, to become actual employees under the planned future single payer. Small businesses are being choked off by regulations (a third millstone which Lenin had not envisioned). College graduates are being saddled into debt slavery by artificially high tuition rates and a nationalized student loan operation. Obamacare includes provisions to seize life savings and family homes (recover costs) after late life medical expenses, to reduce middle class inheritance.

It is no accident or misguided mistake - it is the consistent long term strategy of the left.