Proposal to Cap Retirement Accounts & 2013 Taxes

Moneytalk with Bob Brinker Commentary for April 14, 2013 Radio Show

The following commentary is from my "Retirement Advisor" writing partner,  David Korn. 

PROPOSAL TO CAP RETIREMENT CONTRIBUTIONS

Brinker Comment: Bob discussed an expected proposal from the White House on the budget that would limit individuals form accumulating more than $3 million in individual retirement accounts and other tax-preferred retirement accounts. The proposal would cap 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, equal to about $3 million this year.  Bob slammed the proposal and that it was totally outrageous and would never pass Congress and was pandering to politics.

Caller:  This caller has heard of situations where Mitt Romney a ton of money to his children by gifting severely undervalued stock that then increased dramatically in value.  The caller said if you drove the stock down to nothing and then gifted it to someone, then you move the company to China and the value of the stock starts to accelerate in value like crazy and do that a few times you could end up with $100 million in your retirement account. 

Bob said he doesn’t think the proposed policy to cap retirement accounts is aimed at that kind of thing which would be a rare thing if it did happen.  Bob said this looks like an anti-wealth accumulation policy measure and is consistent with the policy momentum that we have in Washington that wants to make it harder and harder for you to put money away.  There are politicians that are responsible for raising the kiddie tax liability age into adulthood.  This is really bad policy and the sooner we get past that thing the better.  On top of that, it doesn’t even raise any countable money toward the deficit. It is just lashing out at people’s efforts to accumulate a nest egg.

EC(David Korn): US News and World Report wrote a detailed article about it entitled, “Obama Budget Proposes Cap on Retirement Savings” that you can read for free at the following url: http://tinyurl.com/cupd3m6


Kirk Comment:  I stopped putting money into regular IRAs in 1998 when I started to work for myself and don't get a match from my employeer like I did when I worked for HP.  Instead I put the money into a ROTH IRA.  Unless you are paying at the very top tax rate in 2013, I think it makes much more sense to pay the taxes now when they are low, put the money into a ROTH and take it out tax free.  Money above the ROTH should go into index funds or individual stocks where you get lower capital gains or dividend rates (0 to 20%) compared to the much higher normal income tax rates you are charged with IRA RMDs (required minimum distributions.)

For more on tax rates, see:

• April 15  US Federal  Income Tax Brackets - Federal Tax Rates for 2013
• April 15  US Federal Capital Gains Tax Rates for 2013
• April 15 Historical Top Marginal Income Tax Rates: Top US Tax Rates from 1776

Some of the above commentary is courtesy of my writing partner, David Korn: 

David Korn's Stock Market Commentary, Interpretation of Moneytalk (Bob Brinker Host), Financial Education, Helpful Links, Guest Editorials, and Special Alert E-Mail Service.  Copyright David Korn, L.L.C. 2013

If you would like a free sample of David's complete "Brinker related newsletter" and his "Retirement Advisor" newsletter, then click this link to send an email request and please tell us a bit about yourself too.