Here’s what I don’t understand about the “cap” on the IRAs of the wealthy.
When you contribute to an IRA, you get a deferred tax break for contributing (but that’s capped somewhere in the $2k range, I believe, that an individual can write off on their taxes.) Also I thought there was a limit you could contribute every year, and if so, how did these folks get all that money in their IRAs, (investment income?)
So the extra revenue he’s planning on getting comes from what? Making those above the “limit” immediately bring down their IRA to the limit allowance, thus making the money withdrawn taxable? And if that’s so, are they going to charge a 10% fee for early withdrawal, like they do for most retirement funds when you withdraw them before you’re of retirement age, if they’re forcing you to withdraw it.
Somebody explain to me where the revenue comes from, I’m just not clear on this.
This is how the IRA cap would work, from what I read:
you save the maximum in your 401k, invest wisely over your 35-40 year career. It ends up with more than $3M. You roll it over to an IRA so you can have direct control of the money and how it is invested. Presto, with this law change, you must immediately withdraw all monies in excess of the cap, and pay the highest possible marginal tax rate.
Next year, the cap stays at $3M. The stock market is up 20%, you must immediately withdraw all your earnings and pay the highest possible marginal income tax rate.
Punish all producers who have the gall to attempt to earn more than the $200k/yr that the government thinks is enough for you.