Rathbun: ‘The ‘Wealth Tax’ beginsWritten by Gary Rathbun | | GaryRathbun@PrivateWealthConsultants.com
We now see the first salvo from this administration in their effort to destroy your retirement savings. Of course, the premise is that it is only “fair” to limit the amount that a person can have in retirement savings. What is that “fair” amount? Essentially, it is the equivalent of 205,000 in nominal dollars per year in retirement.
According to Bernie Becker in The Hill, “President Obama’s budget, to be released next week, will limit how much wealth individuals, like Mitt Romney, can keep in their IRAs and other retirement accounts.”
The senior administration official said that wealthy taxpayers can currently “accumulate many millions of dollars in these accounts, substantially more than is needed to fund reasonable levels of retirement saving.”
Becker continues, “Under the plan, a taxpayer’s tax-preferred retirement account, like an IRA, could not finance more than $205,000 per year of retirement-or right around $3 million this year.”
I am so happy that the government has taken the burden off of me to determine what is a reasonable amount to live on in retirement. An article on Zerohedge.com quotes Ed Slott, a CPA and an IRA expert, in reference as to how President Obama will use this information to pass his proposal:
The most prominent taxpayer with a multimillion-dollar IRA is Romney, the 2012 Republican presidential nominee and co- founder of Bain Capital LLC. Romney disclosed in public filings during the campaign that his retirement account held between $18.1 million and $87.4 million. At one point, the maximum exceeded $100 million.
IRAs have evolved from a retirement-planning technique into an estate-planning tool for some wealthy families because tax laws allow the accounts to be passed on to heirs, said Ed Slott, an IRA specialist and certified public accountant based in Rockville Centre, New York.
“Over the last election it hit a critical mass when a lot of people found out that Romney had $100 million in his IRA,” Slott said. “People thought, how on earth did that happen? I think that was the tipping point.”
The Romney campaign didn’t explain how he amassed that much money in an IRA when contribution limits are much lower. Most taxpayers can contribute a maximum of $5,500 for 2013. Older workers, self-employed workers and those who save through 401(k)-style plans have higher caps and can roll those accounts into IRAs.
One possibility is that Romney included Bain investments valued at close to nothing that later grew exponentially. The value would increase tax-free in the retirement account and would be subject to taxation at ordinary income tax rates when taken out.
Regrettably, most of the populace is ignorant of how one can accumulate millions into an IRA since they find it more important to consume all of their income rather than, God forbid, actually save for the future. (High-income individuals can contribute hundreds of thousands of dollars to their plan each year if it is structured correctly and easily accumulate several million, but that is for another article.)
With the path we are on, from a monetary policy standpoint, in a few years $205,000 might buy a gallon of milk or a loaf of bread, but Uncle Sam will make sure the “wealthy” cannot afford that milk or bread either. After all, it’s only fair!
The unintended consequences of this proposal are numerous and I will go into them in the future if this idea advances. For now, I will start preparing for the inevitable confiscation coming down the road. The only questions I have are: “What are you prepared to do?” “How far are you going to let Washington destroy this country and your wealth?” I will talk about the answers to these questions and more next time.
Gary L. Rathbun is the president and CEO of Private Wealth Consultants, LTD. He can be heard every day on 1370 WSPD at 4:06 on After the Bell, everyday on the Afternoon Drive, and every Tuesday, Wednesday and Thursday evening at 6 p.m. throughout Northern Ohio on Eye on Your Money. He can be reached at (419) 842-0334 or email him at firstname.lastname@example.org