Since I work in the financial industry when President
Obama recently announced that he would cap the amount you could have in an IRA/401k plan to $3 million. The $3 million dollar amount was calculated by saying if you received a $205,000 annuity from the time you retire until you die how much money would be needed. However, there are a few problems with this calculation. First, as interest rates change the annuity required would also change. Second, as people live longer the amount required may substantially increase as people require more funds to live. This boneheaded proposal would only bring in $9 billion over 10 years which is not
much given the budget is over $3 trillion. According to data
from, Employee Benefit Research Institute as of 2011 only 0.03% of IRA accounts
were greater than $3 million. By the end of 2012 .0041% of 401k accounts held
more than $3 million.
What is really insane is that this would hurt just
regular people who save on an annual basis. Assume someone started an IRA with
just $1. Then assume they invested $10,000 in their IRA every year for 45
years. Assuming they earned just 8% per year they would end up with $3.8
million. What also is forgotten is that required minimum distributions force people with an IRA/401k to take out distributions every year after a person
reaches 70 1/2. The person is then taxed on that income at ordinary rates. So
once Mitt Romney turns 70 ½ he will have a huge tax bill (he will pay ordinary
income on all of that income as well-no capital gains).
Honestly, I don’t even know how this would be implemented.
If someone had $2,999,999 million dollars and they get a $2 dividend check will
you be denied $1? This truly is a confiscation of wealth. If people work hard
and voluntary save their own hard earned money why should the government limit
how much they can save?
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