Taxpayers who save and invest may soon be punished for doing the right thing and investing successfully. In President Barack Obama’s budget proposal, he wants to limit an individual’s total balance in tax-favored retirement accounts to $3 million for someone retiring in 2013. The president feels the need to “define for everyone what is ‘needed’ for a ‘reasonable’ retirement,” says the Wall Street Journal.
For years, the financial industry has been actively educating and encouraging investors to take full advantage of their tax-advantaged 401(k)s and IRAs. “Now He’s After Your 401(k)” says the WSJ, as its headline draws attention to the contradictory message the government is sending to investors. Rather than incentivizing and rewarding hard-working Americans, the policy penalizes “people who work for decades and abstain from buying the bigger house or the new car so they can contribute the maximum to their 401(k)s or IRAs.”
Having the will and thrill to invest is part of the fiber that makes America great. The proposal “undermine[s] a key national priority—helping Americans prepare for a secure retirement,” says the Investment Company Institute in agreement.
I believe the government hindering savers and investors is the equivalent to a referee kicking Miami Heat’s LeBron James out of a game after he’s scored a “reasonable” number of points.
If you have been dutifully paying your taxes, scrimping and budgeting to save and invest in your future, voice your opinion on the budget proposal. Contact your representatives in Washington and tell them to refuse a strategy similar to the socialist policy wonks in Europe who implement anti-saving and investing policies, oblivious and insensitive to the unintended consequences that hurt savers and investors.
401(k) and IRAs have not existed that many years (30 approx.) and it isn’t until in later years that the amounts that can be contributed have become significant. This of course is also the case for SEPs and SIMPLEs. So therefore not too many people have yet $3m in their accounts. But to cap it makes no sense. Especially because it is not supposed to be inflation-indexed, if I read the proposal correctly. And who says that $200K per year is sufficient, if you are raising kids, paying tuition, maybe also taking care of aging parents, the $200K will not suffice. This is a very bad idea by the Administration, and I trust this part specifically will be deleted.