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Old 04-05-2013, 12:54 PM   #21
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The statement says: "...substantially more than is needed to fund reasonable levels of retirement saving...”

So, with SS viability in question, how is a "reasonable" level of retirement savings determined? Is someone going to say: "we've figured it out and you have substantially more than you need?"
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Old 04-05-2013, 01:07 PM   #22
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Well the rumor pegs their starting point in excess of five times FPL per year. I think that's a large enough cushion.
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Old 04-05-2013, 01:12 PM   #23
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Well, it would redefine maxing the 401(k).
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Old 04-05-2013, 01:14 PM   #24
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I think that's a large enough cushion.
I dunno. I'd like to think that I'm the best judge of how much money I want to live on. Maybe I got it wrong.
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Old 04-05-2013, 01:17 PM   #25
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I dunno. I'd like to think that I'm the best judge of how much money I want to live on.
I don't see anything there about determining how much money people are supposed to live on. It seems to be only about how much retirement savings can be tax-advantaged.
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Old 04-05-2013, 01:25 PM   #26
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The language of the proposal makes it sound like it is inflation-adjusted number, i.e. just like tax brackets, annual IRA limits, etc.
So, you don't need to worry about inflation.
Must respectfully DISagree. Proposal language can be VERY different from actual legislation/implementation. US has long history of NOT inflation-adjusting important tax-related items. Like traditional IRA contribution limit remaining at $2k from 1982-2001 vs inflation (cumulative) of ~180% (from US BLS inflation calc link below).
http://en.wikipedia.org/wiki/Individ...rement_Account
Or AMT's initial exemption of $30k remaining unchanged from 1969-1992 despite (cumulative) inflation of >380%.
Alternative Minimum Tax - Wikipedia, the free encyclopedia
Or personal exemption not rising during certain high inflation periods (e.g. remaining @ $1k from 1979-1984 despite 40+% CPI rise).
http://www.irs.gov/pub/irs-soi/02inpetr.pdf
FWIW- Handy link to US BLs inflation (CPI) calc-
http://www.bls.gov/bls/inflation.htm
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Old 04-05-2013, 01:34 PM   #27
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I would imagine that the "Mortality Credits" would make up a significant part of the 6.8% vs a normal SWR. That is to say, once you buy the annuity, the insurance company keeps the money -- even if you die sooner than average. The funds from the deceased subsidize those who live longer.

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And maybe the reason ObGyn65 likes annuities?
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Old 04-05-2013, 01:38 PM   #28
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I don't see anything there about determining how much money people are supposed to live on. It seems to be only about how much retirement savings can be tax-advantaged.
Got it.
Of course, the flaw is forgetting that the wealthy always have options.

Cut off a tax benefit in one area and they'll just go in another direction. Financial whack-a-mole. That's one of the reasons they're wealthy.

This plan is less than 6 hours old and you can already hear the wheels turning. Makes everyone feel good though!
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Old 04-05-2013, 01:39 PM   #29
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Well the rumor pegs their starting point in excess of five times FPL per year. I think that's a large enough cushion.
Not even close. I have no plans to only be 5x richer than poor. Plus the federal poverty level is ridiculously low. I want the gov't out of my retirement planning even more than I want them out of my bedroom.

Also, I wonder what the plan is for people who invest in something and have it go through the roof, lifting their IRA balances past the limit. Would that require you to convert the difference to taxable? And if so, what about the next year? Once you're at the limit, if your investments grow faster than the CPI you'll go over every year, even without adding to the account. This doesn't sound very well thought out to me.
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Old 04-05-2013, 01:51 PM   #30
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Of course, the flaw is forgetting that the wealthy always have options.
That is always a big concern. That's one of the reasons why these necessary measures need to have so much detail and measures of enforcement in them - aspects that often draw criticism (like the recent criticism of the 23? page application for ACA subsidy) - but your point about the tendency toward abuse makes clear that those criticism are without merit.


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Not even close. I have no plans to only be 5x richer than poor.
Yet again: How much richer you plan to be isn't the issue. It's for how much of your retirement savings society benefits from offering you a tax-advantage. Tax laws aren't supposed to be crafted to each taxpayer's own personal benefit, but rather to address society's priorities and objectives. And one of the biggest objectives is reducing deficits, and one way to do that is by not granting tax deferral beyond that which is necessary to lead a reasonably comfortable retirement. It goes hand-in-glove with means-based taxation of social security benefits.

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Plus the federal poverty level is ridiculously low.
That just underscores how much further out of balance the ability to afford retirement is, between rich and poor, than the current numbers make it look.

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I want the gov't out of my retirement planning even more than I want them out of my bedroom.
Cutting off tax deferral at a certain point is exactly that... the government stepping back away from your retirement planning, after you no longer need their intersession as much as less affluent people need it.
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Old 04-05-2013, 01:52 PM   #31
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Tough to see practical restrictions other than a limit on additional IRA contribs, though I can imagine them inventing overly-complex rules for when an individual assumes ownership of a spouse's IRA upon the spouse's death.
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Old 04-05-2013, 01:53 PM   #32
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If they are so concerned about folks putting away "too much" in retirement accounts, wouldn't it make more sense to just "means test" for those with large retirement accounts for things like SS and Medicare?

Again it sends the message that saving/investing is bad. As as has been posted before, there has been a bad history of adjusting these things for inflation, because folks get used to the increasing tax stream it generates.
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Old 04-05-2013, 01:53 PM   #33
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I expect that if something like this was implemented the $3M cap would simply be a limit that would block further tax differed additions to the account from current income. A limit that included growth within the account would be difficult to administer.
That's how I'm reading it too. It doesn't prevent anyone from accumulating more than $3M, it's simply a limit on tax deferred $. You can save all you want in taxable accounts, so it limits no one, it just caps deferring taxes. That doesn't seem unreasonable to me. YMMV

Home mortgage deductions aren't unlimited either.
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Old 04-05-2013, 01:54 PM   #34
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So, is this a limit on how much people can save, is this a limit on how much income people can defer?
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Old 04-05-2013, 01:56 PM   #35
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Good point. But it does not cover all the plans, e.g. it does not cover 401Ks.
I know for solo 401Ks you have to start reporting the value annually tot he IRS once it exceeds $250K. Maybe the same holds true for "real" 401Ks. The form used is the Form 5500-EZ or Form 5500.
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Old 04-05-2013, 01:59 PM   #36
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I see no indication that this limits how much you can save....just how much you can save in an IRA or 401(k). I don't actually have an issue with it.
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Old 04-05-2013, 02:01 PM   #37
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I see no indication that this limits how much you can save....just how much you can save in an IRA or 401(k). I don't actually have an issue with it.
The AMT was intended to hit 155 families when it was implemented. All I can say is...

Unintended Consequences
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Old 04-05-2013, 02:02 PM   #38
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If they are so concerned about folks putting away "too much" in retirement accounts, wouldn't it make more sense to just "means test" for those with large retirement accounts for things like SS and Medicare?

Again it sends the message that saving/investing is bad. As as has been posted before, there has been a bad history of adjusting these things for inflation, because folks get used to the increasing tax stream it generates.
I expect that means testing for SS is around the corner in addition to this plan.

Saving/investing isn't 'bad', but in hindsight with all that's going on, I just wish I had burnt through a lot more money in my younger days.
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Old 04-05-2013, 02:04 PM   #39
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If a $3m cap applies to 401ks as well, then employers would need to be told "Don't contribute further to my account" which could lead to gravevine whispers as to which employees have more than $3m saved up.
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Old 04-05-2013, 02:07 PM   #40
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So, . . .is this a limit on how much income people can defer?
Sounds like it, but only very roughly. Since it is a cap on allowed tax-deferred account size, a person who has really good investment results in these accounts gets to defer less income than someone who had poor returns.
I think the intent is to do an indirect cap on the income stream from tax deferred accounts. Once a person has "enough" to fund such an income stream, then the rest of the nest egg is subject to taxation.

The "enough" part is a theme we've heard before. The theme resonates with some, but does not bode well for anyone who is dependent on the productivity of others, and that's just about everyone (rich or poor). Productivity is what pays those stock dividends, repays those bonds, and even pays the taxes.
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