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Obama Budget Caps IRAs at $3 Million

It is being reported by The Hill, U.S. News, Bloomberg and other reputable news sources that President Obama’s soon to be released budget proposes a $3 million “limit” to the amount an individual  can put aside in tax deferred retirement savings like 401Ks and IRAs.

In a recent article posted on The Hill titled, “Obama budget to take aim at wealthy IRAs“, a senior administration official stated, “wealthy taxpayers can currently ‘accumulate many millions of dollars in these accounts, substantially more than is needed to fund reasonable levels of retirement saving.'” Let that sink in for a moment, “substantially more than is needed to fund reasonable levels of retirement saving.”

Do you think it’s any of the government’s business to decide what is “reasonable” for YOUR retirement savings?

$3 million may sound like a lot of money, but is it? According to the UK’s Daily Mail, Vice President Joe Biden racked up a bill of $585,000 for just ONE NIGHT at a five-star Paris hotel with the tab to be picked up by US taxpayers. Therefore that $3 million cap on retirement savings would last VP Biden less than six days. For those of us with a less extravagant life-style, if your nest egg doesn’t earn a single penny, $3 million comes out to just $120,000 per year if your retirement lasted 25 years. This is a lot for some, not so much for others…especially when you factor in the threat of inflation, rising life expectancies, and skyrocketing healthcare costs.

As we’ve pointed out before, the federal government has been eyeballing 401Ks and IRAs for quite some time. The Automatic IRA Acts of 2010, 2011, and 2012 all aimed at a partial takeover of individual IRA accounts.

With the federal government circling like vultures to get into the retirement planning business, it’s time to take a hard look at how you can protect your hard earned nest egg.

Non-qualified fixed index annuities may be an option.

Full disclosure – yes, I am in the annuity business. If you are reading this on AnnuityWatchUSA.com, you already know this, but if reading it elsewhere, I want to make that very clear. Therefore please, do your own homework and verify everything I’m saying.

A fixed index annuity is a contract between you and an insurance company and I’ll tell you why that is extremely important. The first paragraph of Article I, Section 10 of the United States Constitution states:

No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.

Did you get that? “Or Law impairing the Obligation of Contracts” establishes an impassable barrier prohibiting government interference in the contracts between you and your insurance company, thus safeguarding your fixed index annuity.

Now, let’s look what non-qualified fixed index annuities have to offer.

  • Non-qualified (NQ) FIAs allow you to put an unlimited amount of money in a tax-deferred vehicle you can use to fund your retirement.
  • Unlike IRA contributions, the amount you can deposit annually in a NQ FIA is unlimited.
  • Though you can’t use the amount you put into a NQ FIA as a tax deduction, the FIA will grow completely tax deferred.
  • Unlike IRAs, NQ FIAs don’t have a government mandated Required Minimum Distribution when you reach age 70 ½+. In other words, the government can’t force you to withdraw money you don’t need and pay taxes on it.

The bottom line is this––we are living in uncertain times. Between fears of stock market instability and a government seemingly bent on reshaping how––and how much––you can save for retirement, it’s worth looking into your options. I strongly urge you to talk with a retirement income planning professional to help safeguard your assets.

~ by Cathy DeWitt Dunn