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Old 04-05-2013, 05:54 PM   #61
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Not exactly. It is their money with what could be considered an inchoate tax lien on it. When I look at my IRA/401k stash, I never forget that some of it belongs to the tax man.
You are giving the mafia way to much respect. Think about all the tax that was taken from your employer and yourself. Who is really morally owed that money?
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Old 04-05-2013, 05:56 PM   #62
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Old 04-05-2013, 05:56 PM   #63
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But, really, does it call for such handwringing?
Surely one man's "handwringing" is another's "justifiable concern". And this is just a proposal. But it is fairly radical--a national tax on wealth (which is what this would be if it affects current account balances) is something we haven't done.
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Old 04-05-2013, 06:02 PM   #64
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You are giving the mafia way to much respect. Think about all the tax that was taken from your employer and yourself. Who is really morally owed that money?
We live in a civilized society, not in a state of nature. By mutual consent, we tax ourselves to provide the benefits that we enjoy as members of that society. I enjoy many blessings by living in this country, including the most important one of having an economic system where I can earn a good salary. Accordingly, I believe that there is indeed a moral claim by society on some of my income. I don't like waste or spending on stupid things, but I'm happy to pay my taxes.
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Old 04-05-2013, 06:03 PM   #65
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That hole in the backyard stuffed with Kruggerands and Maple Leafs is starting to look more appealing.



I have little doubt that if I had continued working I'd pushing the $3 million in a few years.

I currently have $1.4 million in my retirement accounts. This was accumulated from $1000-$2,000 ira contributions in 81-83 and then max out 401K contribution and most years and getting a generous company profit sharing contribution from 1984-2000. Over the last 10 year I've averaged just about 7.5% annual return a tad under the 8% of the S&P 500. I would have continued maxing out my 401K and with a company profit sharing in the 10K range contribution would have averaged $25,000 over 12 years that is another 300k, assume another 200K in investment gains and now my retirement account is $1.9 million at age 53. Now accumulating this amount of money assumes a salary in mid 100K range, well below the "rich" folks salary of 200K for singles.

1.9 million will reach $3 million by age 65 with a 3.8% return even adjusted for inflation a real 4% return isn't a particular hard barrier to achieve. Obviously at the point, if I was still working it would foolish for me to contribute anything to my 401K since it appears like it would be taxed twice. But it would really suck to have the company profit sharing contributions restricted.

I also have to question the administration assumptions on my retirement income. $3 million generates $210,000 in retirement income,really in what universe?

For instance using the Federal Government own TSP annuity calculator a 65 year old retiree with a 60 year old spouse, $3 million buys an annuity generate $7818/month, $93,800, with COLA light increase. A far cry from $210,000

Finally, part of the original idea behind IRA and 401K was not just to allow people to save for retirement but to encourage Americans to save period, this proposal discourages it.
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Old 04-05-2013, 06:08 PM   #66
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But it is fairly radical--a national tax on wealth (which is what this would be if it affects current account balances) is something we haven't done.
I guess I don't see how this is any different than RMDs at age 70, which is already the law and is in no way a wealth tax. RMDs are a way to tax some of the income that has heretofore been untaxed. This seems to be the same as moving up the RMD age for certain people.
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Old 04-05-2013, 06:11 PM   #67
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I foresee a pretty interesting Congressional fight on this $3M IRA max subject. Sure $3M sounds like a ton of cash today but long term it really is not that much. I wonder how many Boomers who have $1.5M stashed in their IRA ever thought that they would have such a large amount? Is $1.5M really that large? No, it is not, especially if it is to last 30 years.

Occupy Wall Street (OWS) folks start getting your bed rolls and sleeping mats together...sounds like your summer fun will soon begin.
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Old 04-05-2013, 06:13 PM   #68
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I guess I don't see how this is any different than RMDs at age 70, which is already the law and is in no way a wealth tax. RMDs are a way to tax some of the income that has heretofore been untaxed. This seems to be the same as moving up the RMD age for certain people.
Exactly. The change merely brings future tax revenue in several years for a very small slice of the IRA-holding populace, at the expense of another round of tax code complexity and reporting requirements. As a long term budget balancing contribution, this is all smoke and mirrors. (In other words, the change makes the 10 year projected tax revenues look better, at the expense of the 10-20 year revenues.)
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Old 04-05-2013, 06:18 PM   #69
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Exactly. The change merely brings future tax revenue in several years for a very small slice of the IRA-holding populace, at the expense of another round of tax code complexity and reporting requirements. As a long term budget balancing contribution, this is all smoke and mirrors. (In other words, the change makes the 10 year projected tax revenues look better, at the expense of the 10-20 year revenues.)
I agree that it is politics, not economics, that drives this.
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Old 04-05-2013, 07:39 PM   #70
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Seems like some premature handwringing to me too since we still don't know the details. There are already many annual limits on $ deferred for IRAs and 401k's. I suspect many/most of us saved tax deferred and taxable most of our working years.

As far as I can tell no one is proposing a limit on how much anyone can save, only a limit of $3M tax deferred. You can still save as much taxable as you want.

Weren't tax deferred accounts meant to encourage/help the middle class accumulate a nest egg? Surely that didn't mean billionaires should be able to accumulate $10B tax deferred (assuming that's not possible, just illustrating the point)? So I assume the handwringing is over what the threshold ($3M?) should be, and not that some accumulated threshold for tax deferred may be appropriate.

Further exaggerating to make the point, surely we don't think everyone should be able to tax defer unlimited amounts...
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Old 04-05-2013, 07:43 PM   #71
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This is like a game. Taxpayers vs. the Govt. However, the Govt has the addvantage - they make the rules. Everything is fine as long as the Govt is ahead. However, if it looks as though the Taxpayer may pull ahead it is time to change the rules.


If a person is near the $3M cap and over 59 1/2, they might consider converting more of their 401K/TIRA to a ROTH using using some of the exchanged funds for paying the taxes due. This would give the Govt some tax $ now (which they want and are going to get anyway) and allow you a little time until you hit the cap again - repeat.
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Old 04-05-2013, 07:59 PM   #72
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I agree that it is politics, not economics, that drives this.
An accurate statement, and applicable to the entire budget proposal as well.

Interesting to see so many folks get their panties in a wad over something that doesn't stand a snowball's chance in hell of passing without prolonged political wrangling and major changes. The end product will likely bear little resemblance to this trial balloon.
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Old 04-05-2013, 08:11 PM   #73
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Further exaggerating to make the point, surely we don't think everyone should be able to tax defer unlimited amounts...
Why not?

I guess it depends on one's views...

Did multimillionaires or billionaires earn their money, or did they steal it from society?

If we don't want to judge others based on various ethnic/social categories, are we quick to judge others on what we think should be a livable income for someone else?

Do we care about adding yet more to an already ridiculously complicated tax code, or is the added cost ignored because we think it only affects someone else?

Are government issues primarily a spending problem, or primarily a "not taxing enough" problem?

I do not mean these questions as a rant, but as an observation. Perhaps my upbringing as a child of immigrants, who came to the U.S. because they saw opportunity for unlimited potential as compared to the growing restrictions where they lived is my reason to question this.
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Old 04-05-2013, 08:28 PM   #74
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