Skip to comments.Obama budget caps tax-deferred retirement contributions to … half of what he’ll get
Posted on 05/03/2013 1:38:42 PM PDT by SeekAndFind
Yesterday, I linked Liz Peek’s column from The Fiscal Times pointing out that Barack Obama’s new budget has oddly stringent caps on tax-deferred savings in IRAs and 401Ks. Liz asked why Obama wants to punish savers. Today, Allen Sloan asks in the Washington Post why Obama wants twice as much in retirement benefits than the rest of Americans can build in tax-deferred savings, at least under the budget Obama proposes:
For starters, the point at which Obama wants to eliminate the ability of you and your employer to deduct contributions to your retirement account isnt actually the $3.4 million in his budget proposal thats just an estimate. The real number is how much a couple age 62 would have to pay for an annuity that yields $205,000 a year. That $3.4 million which applies to the combined values of your pension and retirement accounts is subject to a sharp downward change in the future because annuity issuers charge significantly less for an annuity when interest rates are higher than they do today, with rates at rock-bottom levels.
Ill grant you that $205,000 a year the current IRS maximum for what a pension fund can pay a recipient is serious money in many places. But it doesnt buy you a rich retirement lifestyle in, say, New Yorks Manhattan, where $205,000 is equivalent to $88,000 in Manhattan, Kans. The Manhattan-Manhattan distinction, from Money magazines cost-of-living calculator, is an example of the difference between being rich statistically and being rich in reality.
Second, I cant get past Obamas wanting to limit savers tax-favored accounts to only about half the value of what he stands to get from his post-presidential package. Based on numbers from Vanguard Annuity Access, I value his package at more than $6.6 million. (My calculations are at fortune.com/sloan.)
Thats right, $6.6 million. And that doesnt include the IRA into which Obama has been socking away the $50,000-a-year maximum contribution, using money from his book royalties. Or the $18,000 (plus cost of living) a year he will get at age 62 for his service in the Illinois Senate, or any other benefits he or his wife may realize from past or future jobs.
Let’s revisit Liz’s column at this point to find out exactly how much Obama thinks he’ll get by capping everyone else’s tax-deferred savings:
The proposal is expected to save the government only $9 billion over the next 10 years a drop in the budget bucket. This suggestion is not aimed at balancing our books, but at preventing the industrious from getting ahead. This, at a moment when it is clear that the nation should be promoting, and not discouraging savings, when Social Security looks likely to become another welfare program rather than a broad-based retirement account, and when the government boasts about reducing not adding — red tape. And when, by the way, young people have been scorched by the financial crisis and are skittish about investing. Young people who live in a time that celebrates conspicuous consumption and not thrift.
The savings rate in our country fell to 2.6 percent in the first quarter of this year, the lowest rate since the end of 2007. This is not good news. Savings provide the capital we need for investment, as well as the monies that Americans need for retirement.
While President Obama was discouraging savings by high earners, he was including suggestions for a National Infrastructure Bank and Fast Forward Bonds aimed at leveraging private capital for repair of the nations outdated roads and airports.
Does anyone else see a contradiction here?
If we want to grow the economy, we want to encourage investment — especially the kind of long-term investment that IRAs and 401Ks provide. People seem to forget that these retirement plans were a fundamental reason for the massive expansion in capital during the 1980s. They unleashed American middle class wealth into capital markets, fueling the revolutionary growth of the stock market and creating a generation of prosperity. Prior to that period, the investor class in the US was about 15%; afterward, it was 70% or more.
Clearly, Obama has other priorities than growing the economy and encouraging long-term investment. He wants to expose more income to taxation and take even more capital out of the private markets, because at a certain point, you’ve made enough money. You have, anyway.
Amatuer Hour, hour after hour after hour...
Three and a half more YEARS of this, Kids.
Lord, Hear Our Prayer!
Three and a half more years, and then the low information voters will give us Hillary. Oh, Lord help us. (Please Sarah, run)
And even then, make sure they don't have access to anything heavy enough to break the bank open!
“”And that doesnt include the IRA into which Obama has been socking away the $50,000-a-year maximum contribution””
Surely that figure can’t be right!!!! Yearly IRA contributions were never more than $5000 from what I remember. I can’t be that far gone. Can I?
IRA Contribution Limits
YEAR AGE 49 & BELOW AGE 50 & ABOVE
2002-2004 $3,000 $3,500
2005 $4,000 $4,500
2006-2007 $4,000 $5,000
2008 $5,000 $6,000
2009 $5,000 $6,000
2010 $5,000 $6,000
2011 $5,000 $6,000
2012 Indexed to Inflation Indexed to Inflation
2013 Indexed to Inflation Indexed to Inflation
Very early on (2008?) I saw a video of 0bama, talking to a reporter. He said, “I am the President of the United States. No one should make more than me.”