The proposal is being spun as a way to
prevent wealthy private-equity executives from amassing huge IRAs—like Mitt
Romney’s, once estimated to be worth as much as $100 million. But it would also
curb the savings ability of self-employed professionals like doctors and
lawyers. As these business owners reach the cap, and there’s nothing left in it
for them, they might shut down or reduce plans that benefit their employees.
You may have heard there are a
few budget plans meandering around the capitol, one of which is President Obama’s
proposed budget. We don’t have many details as of yet, but self-employed
professionals should take note – they could be tax targets when it comes to
their retirement savings.
For retirement savers and those
making powerful use of an IRA, here’s at least one tidbit the rumor mill has
been circulating well before the budget’s release. If enacted, “wealthy”
individuals would be pinched with a $3 million cap on their IRA holdings.
Several sources have reported on
this, to include Time Magazine in an
article titled “Obama’s Budget Would Cap Tax-Advantaged
Savings.” Although $3 million may sound like a lot, it may end up
affecting more savers who otherwise might not be considered traditional tax
targets: self-employed individuals like doctors, lawyers, and entrepreneurs.
The self-employed all have unique abilities (and needs) to contribute large
amounts to their IRAs.
So, who is the intended target
of this kind of a cap? One name keeps surfacing: Mitt Romney. Remember that
fabled $100+ million IRA, as pointed out by the Boston Globe in an article titled “Obama budget would pinch IRAs of wealthy
with $3m cap.”
The analyses of the proposal are
still being churned out, and there are some important details to be hammered
out as well. At present, this cap is no more than a proposal and part of a
budget plan none-too-well-liked by either side. Nevertheless, this kind of cap
and its prying look at tax-advantaged plans is worth watching.
Time Magazine (April 10, 2013) “Obama’s Budget Would Cap Tax-Advantaged
The Boston Globe (April 10, 2013) “Obama budget would pinch IRAs of wealthy
with $3m cap”