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Old 02-06-2015, 06:43 PM   #61
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> enough, it estimates, to provide an annual income of $210,000 in retirement

I think we have a definition of "rich" here:

$210,000.01 annual income
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Old 02-06-2015, 06:44 PM   #62
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Originally Posted by Big_Hitter View Post
the "program" was intended to supplement defined benefit and SS income....since most private companies have done away with defined benefit plans, all that's left are DC plans....why would you want to penalize someone for saving as much as possible and investing riskily to maximize his/her balance?
No one would be penalized. It is just beyond a certain point tax deferral would no longer be available. Why should a couple with $6.8 million of retirement savings continue to get to continue to save for retirement on a tax-deferred basis? They can still save for retirement, just not subsidized by taxpayers.

At a 4% WR that would be $272k a year. Cry me a river but no sympathy from me.
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Old 02-06-2015, 06:45 PM   #63
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For the record, inherited ROTH's are subject to RMDs.

Roth IRA Required Minimum Distribution (RMD) | RothIRA.com
Thanks, I hadn't understood that properly. Still, leave your multi million dollar Roth to a grandkid or six, and they can take distributions based on their life expectancy. That should still allow their Roths to grow even larger than the original. They may not be able to take over the world, but can still build a nice untaxable nest egg.
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Old 02-06-2015, 07:02 PM   #64
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Thanks, I hadn't understood that properly. Still, leave your multi million dollar Roth to a grandkid or six, and they can take distributions based on their life expectancy. That should still allow their Roths to grow even larger than the original. They may not be able to take over the world, but can still build a nice untaxable nest egg.
I hate to be pedantic Harley but a non-spouse inherited ROTH (child, grandchild etc) has to be withdrawn over the next 5 years, so not much scope for growth.
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Old 02-06-2015, 07:10 PM   #65
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As a country already looking at an impending retirement crisis, are they really going to focus on a handful of people with "excessive" funds instead of the real issues? It was said earlier on this board that preventing people from investing in alternative investments would essentially prevent any issues altogether.
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Old 02-06-2015, 07:23 PM   #66
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10 years from now, I plan to have more than $3.4 in my retirement accounts. I assume that would mean withdrawing all gains every year and pay full income tax?
I would be younger than 59.5, would i also have to pay a 10% penalty on top of that too?

This would really make me have to re-think my strategy. It would probably add a couple years to my current plan.
According to this link, President Obama’s 2016 budget targets retirement accounts - MarketWatch
the only impact would be that you couldn't make additional contributions when you are over the cap.
There is no mention of forced withdrawals.
See #6.
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Old 02-06-2015, 07:48 PM   #67
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Call me a cynic, but I'd bet that they'd "neglect" to index it.
The $210,000 isn't a new number created just for this proposal. It's the upper limit on defined benefit pensions that's been around for some time.

That limit is already indexed. This indexing was established by the EGTRRA in 2001. http://www.americanbenefitscouncil.o...hart061206.pdf

So if Congress "forgets" about indexing, it would be indexed. They would have to deliberately un-index a number that's already indexed.

Of course they could do that, but they could also do that with every indexed number they have.
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Old 02-06-2015, 08:08 PM   #68
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Right now the IRS doesn't collect any information about the balance of any of our accounts.
Actually they already do collect annual balance information for all IRA accounts for any taxpayer who has deductible and non-deductible contributions in any combination of IRA accounts. It's a small stretch to them wanting this info for all accounts and they are fresh off of consolidating cost basis info reporting for all non-retirement accounts.
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Old 02-06-2015, 08:26 PM   #69
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As a country already looking at an impending retirement crisis, are they really going to focus on a handful of people with "excessive" funds instead of the real issues? .........
Yea, it's just like I told that cop that gave me a speeding ticket. "Why aren't you out chasing real criminals?"
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Old 02-06-2015, 08:30 PM   #70
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It was said earlier on this board that preventing people from investing in alternative investments would essentially prevent any issues altogether.
Seems a lot more straightforward and a lot less intrusive--to the degree there's an "issue" at all. But I don't think it would accomplish the true underlying objective of this proposal.
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Old 02-08-2015, 11:18 AM   #71
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Disregarding the logistics of how this would work in practice, the problem, as I see it, with this proposal would be to limit deferrals on an annual basis using projected balances based on statutory assumptions.


This process would result in chopping off the top of the "peaks" during the accumulation period without lifting the "valleys".
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Old 02-08-2015, 11:19 AM   #72
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No one would be penalized. It is just beyond a certain point tax deferral would no longer be available. Why should a couple with $6.8 million of retirement savings continue to get to continue to save for retirement on a tax-deferred basis? They can still save for retirement, just not subsidized by taxpayers.

At a 4% WR that would be $272k a year. Cry me a river but no sympathy from me.
Did you read the PDF on post 37?


They would be penalized during the accumulation period...during their 30s, 40s, 50s...etc. There will be plenty of crying.
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Old 02-08-2015, 11:31 AM   #73
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Right now the IRS doesn't collect any information about the balance of any of our accounts. This proposal changes that and provides a new "in" to allow taxation based on assets rather than income. Some people think that is great. I don't.

The history of our tax code makes it clear that this new way to discriminate (based on wealth and not income) and to differentially tax using this method will not remain restricted to "the rich". Of course, maybe it will be different this time. . .
IRS does get annual 5498 report, which give year end balance in all IRAs, including Roth's. These reports also give data on ones beneficiaries, and detail the year end portfolio.

Ha
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Old 02-08-2015, 11:40 AM   #74
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I hate to be pedantic Harley but a non-spouse inherited ROTH (child, grandchild etc) has to be withdrawn over the next 5 years, so not much scope for growth.
That is not true, hence Ed Slott's Stretch IRA concept.
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Old 02-08-2015, 12:02 PM   #75
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No one would be penalized. It is just beyond a certain point tax deferral would no longer be available. Why should a couple with $6.8 million of retirement savings continue to get to continue to save for retirement on a tax-deferred basis? They can still save for retirement, just not subsidized by taxpayers.

At a 4% WR that would be $272k a year. Cry me a river but no sympathy from me.
Of course you are penalized. Saving Sam (aka most forum members) maximize his 401K and makes wise/luckily investment choice. His retirement saving is also aided by his employer who make contribution to his 401K and/or put aside money for a defined benefit plan.

Shortly after turning 50 interest rates rise, changing the discount and putting him over the limit. Not only can't Sam add any more to his 401K but neither can his employer. How is this not penalizing Sam.

I suspect that most successful folks in law enforcement, military service, and probably many state employees, nearing 50 who have 25-30 years of service and also have contributed to their TSP/401/403 are probably near the limit now, if interest rate increase a couple of percent.

In fact if you are eligible for a 5,000+/month pension at age 50 and you have more than ~$750,000 in deferred savings than you have hit the cap congratulations. Each $1,000/month in pension is worth roughly $265K in savings.
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Old 02-08-2015, 01:33 PM   #76
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The more I think about the harder this proposal would make it to retire early, this really hits directly at the core of the ER board.

Right now if Sam's introduction post was something like. I'm Sam, I'm 49 and I really want to retire. I make 120K/year I am eligible for 50%@50 pension, with no Cola. If I wait until age 55K I am eligible for 70% pension on my final salary. I have 100K in saving and $750K in 401K. DD starts college next year, and DW and I would like to spend next winter in Australia. I think we'd need to spend 100K until DD is out of college and then our spending would drop to 80K.

These facts would generate a spirited debate with some saying go for it, and others advising caution due to the lack of COLA on the pension and difficulty of withdrawing cash to fund the next 4 years of high spending.

However, if the retirement proposal was adopted. There would be little point in Sam continuing working, his pension wouldn't increase and he couldn't add more money to his 401K.

3.4 million sounds like a lot, but it really isn't in terms of present value of perfectly upper middle class pension and reasonable tax deferred savings that we see on the forum every week.
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Old 02-08-2015, 01:38 PM   #77
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The more I think about the harder this proposal would make it to retire early, this really hits directly at the core of the ER board.

3.4 million sounds like a lot, but it really isn't in terms of present value of perfectly upper middle class pension and reasonable tax deferred savings that we see on the forum every week.
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Old 02-08-2015, 01:53 PM   #78
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There would be little point in Sam continuing working, his pension wouldn't increase and he couldn't add more money to his 401K.
As far as I know this proposal has nothing to do with DB pensions, so why do you say the pension cannot increase. Also, if there was a limit that prevented additional contributions to a 401k, then Sam could continue to save whatever he wanted in a regular taxable account and use that toward retirement.

I do agree that if this proposal selectively prevented employer contributions or matches to 401k that would unfairly punish Sam.
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Old 02-08-2015, 01:58 PM   #79
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DB was included when they tried this two years ago. Why wouldn't it be this time?
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Old 02-08-2015, 01:59 PM   #80
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As far as I know this proposal has nothing to do with DB pensions, so why do you say the pension cannot increase.
See link at Post 29. Reporting indicates the proposal includes DB pensions.
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