President Obama Proposes Cap On Retirement Savings

[TPS]

Tax deferal is not a tax cut; and you are pretending as if it is. This money all gets taxed, as income. It produces minimal short term revenues, but longer term loss of revenues. All this does is serve to incentivize behaviors, and make socialists, whom I am rapidly beginning to believe have more value stacked in a pile than standing in a room, swoon.

That is the underlying economic issue: are the additional revenues generated today worth more than the loss of revenues in the future? As Chef could tell you, a $ in taxes today is more valuable than a $ in the future. Are people more concerned about the deficit today or the future deficit? And today's deficit is compounding....

That is independent of the political issue of how you feel about the government capping a program it created...

[Fezmid]

That is the underlying economic issue: are the additional revenues generated today worth more than the loss of revenues in the future? As Chef could tell you, a $ in taxes today is more valuable than a $ in the future. Are people more concerned about the deficit today or the future deficit? And today's deficit is compounding....

That is independent of the political issue of how you feel about the government capping a program it created...

So you're ok with the government knowing exactly how much money, to the penny, you have at any point in time, and being able to legally look at that data whenever they want? Because that's what has to happen to keep track of this cap.

[TPS]

Again, all of the things you list hit EARNINGS, not SAVINGS. The government has no right looking in my investment accounts to see if I've saved "enough." They can cap how much I can put in a 401(k) per year or how much I can put in a Roth IRA or whatever, but they shouldn't be allowed to say, "You've saved enough over the past 20 years, you don't need any more money now."

This policy does NOT do that. In addition to the annual cap that you can put into a tax-deferred account, this creates a maximum amount that you can put into a deferred account during your lifetime--it does not prevent you from using your after-tax income to invest. You can still put money into a Roth IRA (aren't we all supposed to be maxing this out?); you can still put any amount of $ into a mutual fund, or any other type of investment from you after-tax income. This proposed policy does NOT tell you to stop saving; it gives a max on how much you can put into deferred accounts. Edited April 15, 2013 by TPS

[4merper4mer]

That is the underlying economic issue: are the additional revenues generated today worth more than the loss of revenues in the future? As Chef could tell you, a $ in taxes today is more valuable than a $ in the future. Are people more concerned about the deficit today or the future deficit? And today's deficit is compounding....

That is independent of the political issue of how you feel about the government capping a program it created...

 

Do you really believe they won't spend every dollar they get and immediately? These people are like Canadians with $5 in their pocket; except they waste it on more than just another beer which will be vomited in a gutter. They spend it right away on equally useless things. At least the Canadian gets to forget he is Canadian while he blacks out from being drunk; the US government only gets more empowered.

[TPS]

So you're ok with the government knowing exactly how much money, to the penny, you have at any point in time, and being able to legally look at that data whenever they want? Because that's what has to happen to keep track of this cap.

It doesn't do that. It sums up all tax-deferred accounts.

I'm more concerned about how they surveil my communication...

[DC Tom]

I'm more concerned about how they surveil my communication...

 

You shouldn't be concerned about something that impacts very few people.

[TPS]

Do you really believe they won't spend every dollar they get and immediately? These people are like Canadians with $5 in their pocket; except they waste it on more than just another beer which will be vomited in a gutter. They spend it right away on equally useless things. At least the Canadian gets to forget he is Canadian while he blacks out from being drunk; the US government only gets more empowered.

I'm questioning the original position that this policy should enrage us, when it is not any different from what the government does with most tax policy--adding a cap on things. Do I like what's become of our big brother government? No. Are they too involved in my life? Yes. Would I like to see less spending and lower taxes? Yes.

Independent of those broad questions: Should the government cap tax deductions, tax-deferred shields, etc.? Probably.

[B-Large]

Ok, so they cap what you can save in a Tax Advantaged 401k/ 403B, or at least cap the amont youo can save prior to taxation. I guess people will have to begin investing for retirement with post-tax money... most of already do it whether it is stocks, bonds, property, etc. Are we that surpised with a Government that can't help itself but to pull out the credit card and run the presses that some of these tax advantaged goodies will end up in the crosshairs.

 

I am not suprised. I am worried they will change the law and take away my depreciation from investment real estate, that is such a sugar sweet goverment giveaway I can't get enough of it!!! To be serious though, depreciation expense on a building that goes up in value... its a great deal.

 

Outraged? No. Suprised? No. Concerned it will affect savings rates? Probably.

 

Do you really believe they won't spend every dollar they get and immediately? These people are like Canadians with $5 in their pocket; except they waste it on more than just another beer which will be vomited in a gutter. They spend it right away on equally useless things. At least the Canadian gets to forget he is Canadian while he blacks out from being drunk; the US government only gets more empowered.

 

Is it irony that Canada is is a better fiscal situation than the US? I know its not apples to apples, but the point is not less pathetic.

 

But you are right, they wil spend that extra dollar rather than pay doen debt of scale back programs.

[4merper4mer]

 

Is it irony that Canada is is a better fiscal situation than the US? I know its not apples to apples, but the point is not less pathetic.

 

But you are right, they wil spend that extra dollar rather than pay doen debt of scale back programs.

 

Canada in better fiscal situation? It depends on your point of view. They don't have to spend on military because we defend them. They don't have to spend on medicine because we subsidize them by having our citizens pay all the fixed costs. Basically they produce nothing, or not much and live under our umbrella. That's why they are typically falling down drunk all day and still even have a "country". Between our neighbor and any invader having to look at Canadians all day while they are freezing to death in July, who is going to attack them?

[Fezmid]

This policy does NOT do that. In addition to the annual cap that you can put into a tax-deferred account, this creates a maximum amount that you can put into a deferred account during your lifetime--it does not prevent you from using your after-tax income to invest. You can still put money into a Roth IRA (aren't we all supposed to be maxing this out?); you can still put any amount of $ into a mutual fund, or any other type of investment from you after-tax income. This proposed policy does NOT tell you to stop saving; it gives a max on how much you can put into deferred accounts.

It does not give a max on how much you can put into a deferred account. It gives a max to how much you cann HAVE in your accounts. From the article:

 

"So Mr. Obama proposes to "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 for someone retiring in 2013."

 

Balance, not contribution. So if I invest $1, and it somehow turns into $3M after 5 years, I can no longer invest any more money into my retirement. And what happens to funds over $3M? Who knows...

 

So (again, based on the article, I haven't read any of the official budget proposal) that means the government needs to monitor your retirement accounts to know if you're at the $3M level or not because it's BALANCE, not CONTRIBUTION.

[B-Large]

Canada in better fiscal situation? It depends on your point of view. They don't have to spend on military because we defend them. They don't have to spend on medicine because we subsidize them by having our citizens pay all the fixed costs. Basically they produce nothing, or not much and live under our umbrella. That's why they are typically falling down drunk all day and still even have a "country". Between our neighbor and any invader having to look at Canadians all day while they are freezing to death in July, who is going to attack them?

 

Fair enough....

 

It does not give a max on how much you can put into a deferred account. It gives a max to how much you cann HAVE in your accounts. From the article:

 

"So Mr. Obama proposes to "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 for someone retiring in 2013."

 

Balance, not contribution. So if I invest $1, and it somehow turns into $3M after 5 years, I can no longer invest any more money into my retirement. And what happens to funds over $3M? Who knows...

 

So (again, based on the article, I haven't read any of the official budget proposal) that means the government needs to monitor your retirement accounts to know if you're at the $3M level or not because it's BALANCE, not CONTRIBUTION.

 

I assume once you hit the cap, you have to put your money in non tax advantaged private investment vehicles... as most 401Ks are with private companies anyway, I am not sure the point of capping the balance, but understand capping the contribution amount that is pre-tax....

 

Makes a Flat/ Fair Tax much more attractive

[4merper4mer]

It does not give a max on how much you can put into a deferred account. It gives a max to how much you cann HAVE in your accounts. From the article:

 

"So Mr. Obama proposes to "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 for someone retiring in 2013."

 

Balance, not contribution. So if I invest $1, and it somehow turns into $3M after 5 years, I can no longer invest any more money into my retirement. And what happens to funds over $3M? Who knows...

 

So (again, based on the article, I haven't read any of the official budget proposal) that means the government needs to monitor your retirement accounts to know if you're at the $3M level or not because it's BALANCE, not CONTRIBUTION.

 

 

I'm sure they will be fair about how they monitor it.

[B-Large]

How is a tax deduction an entitlement

 

You just opened a nice can of worms with that statement.

 

Its not an entitlment per se, because you are not forced to contribute to a qualified program. but a deduction is prefential treatment by the government to enagage in certains behaviors, so it is mildy coercive.

[TakeYouToTasker]

Its not an entitlment per se, because you are not forced to contribute to a qualified program. but a deduction is prefential treatment by the government to enagage in certains behaviors, so it is mildy coercive.

STOP MAKING ****ty ARGUMENTS.

 

I will repeat myself:

 

The intellectual gymnastics you are engaging in to make that argument are absolutely astounding.

 

You're trying to invent hypocrisy by ignoring glaring differences. Your premise that alloing people to keep there own money is an entitlement can only logically extend from the notion that all earnings rightly belong to the state, and that particular philosophy has a name. If that isn't your position, then you run into some glaring problems:

 

Not taxing people so that they can save their own money which they have worked to earn in order to meet their expected or desired expenses is the opposite of "entitlements".

 

Trying to nudge people into self-reliance isn't nanny-state-ism at all. Nanny-state-ism is trying to push people into greater reliance on the state by awarding them actual entitlements which they haven't necessarily earned on merit. You're distorting the idea so that any government encouragement of any behavior at all becomes an entitlement. Since anything the government does will encourage something, that makes anything it does "an entitlement" and thereby essentially renders the concept meaningless, and I'm not going to allow you to make that ****ty argument.

[BringBackFergy]

As a solo practitioner with two secretaries, I opened a SIMPLE IRA years ago that I can contribute to and match amounts that my two employees defer in their own plan. The "maximum" I can put into my SIMPLE IRA account (my own account) is $11,250 per year. Assuming I wanted to put more into this account, isn't this really a cap on my retirement?? I mean, is this proposal by Obama anything new??

 

I knew I should have been a cop, a teacher like my wife or a government worker...then I wouldn't have to worry about putting money aside. My retirement would be guaranteed in a defined benefit plan.

[Fezmid]

As a solo practitioner with two secretaries, I opened a SIMPLE IRA years ago that I can contribute to and match amounts that my two employees defer in their own plan. The "maximum" I can put into my SIMPLE IRA account (my own account) is $11,250 per year. Assuming I wanted to put more into this account, isn't this really a cap on my retirement?? I mean, is this proposal by Obama anything new?

Yes, it's new. It's based on the total VALUE of your investment accounts, not by your CONTRIBUTIONS. According to the article, anyway.

[TakeYouToTasker]

As a solo practitioner with two secretaries, I opened a SIMPLE IRA years ago that I can contribute to and match amounts that my two employees defer in their own plan. The "maximum" I can put into my SIMPLE IRA account (my own account) is $11,250 per year. Assuming I wanted to put more into this account, isn't this really a cap on my retirement?? I mean, is this proposal by Obama anything new??

 

I knew I should have been a cop, a teacher like my wife or a government worker...then I wouldn't have to worry about putting money aside. My retirement would be guaranteed in a defined benefit plan.

A cap on contributions to any one type of qualified plan, amongst many, is not nearly the same on a cap on balances for all plans combined.

 

Also, speaking to your second point about not having the foresight to seek a career as a public sector employee: a) as a doctor, you'll likely be one soon, and b) you'll notice that there was no mention made of restricting "excessive" pensions.

[TPS]

It does not give a max on how much you can put into a deferred account. It gives a max to how much you cann HAVE in your accounts. From the article:

 

"So Mr. Obama proposes to "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 for someone retiring in 2013."

 

Balance, not contribution. So if I invest $1, and it somehow turns into $3M after 5 years, I can no longer invest any more money into my retirement. And what happens to funds over $3M? Who knows...

 

So (again, based on the article, I haven't read any of the official budget proposal) that means the government needs to monitor your retirement accounts to know if you're at the $3M level or not because it's BALANCE, not CONTRIBUTION.

That's what I meant when I said the "max you can put in over your lifetime." It creates an annual cap and essentially a lifetime cap. That is, if your balance reaches $3 million before you retire, then you can't put anymore into tax-deferred accounts.

 

Btw, as LA pointed out, I haven't said i think it's a good/bad idea. My entire point all along is that Tasker's statement is over the top:

If you read this article and aren't completely outraged, your personal politics are so far gone that it invalidates your opinion in any rational discussion.

[ICanSleepWhenI'mDead]

So you're ok with the government knowing exactly how much money, to the penny, you have at any point in time, and being able to legally look at that data whenever they want? Because that's what has to happen to keep track of this cap.

You may already know this, but I believe (not 100% certain) that if you ever roll over funds from one tax-deferred account to another, the exact amount of the rollover must be reported to the IRS by your financial institution, and you are required to report the amount of the rollover on your own tax return. Not the same thing as continuous tracking of your accounts, but something to be aware of if government intrusion in your financial affairs concerns you.

[BringBackFergy]

A cap on contributions to any one type of qualified plan, amongst many, is not nearly the same on a cap on balances for all plans combined.

 

Also, speaking to your second point about not having the foresight to seek a career as a public sector employee: a) as a doctor, you'll likely be one soon, and b) you'll notice that there was no mention made of restricting "excessive" pensions.

No, I'm a lawyer in a small farming town (Wills, Estates, real estate and some litigation). Am I jealous of defined benefit plans and government pensions...you bet. At some point though, those government workers (and their union reps) will need to face the realization that either they need to contribute to their own retirement or face gigantic job losses/cuts. School Districts are already cutting positions because the towns can't generate sufficient revenue to fund the Tier 1 and 2 retirements. Guaranteed money for retirement and longer life expectancy = a major issue that needs to be addressed.