President Obama's budget, just sent to Congress, proposes to cap tax-advantaged savings across all accounts at $3 million in order to raise $9 billion over 10 years. 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.
Three budget plans are winding their way around the capitol, to include President Obama's. While the details are thin and the pundits are still weighing in, self-employed professionals need to take heed. They are 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.