Tags: Obama | proposal | retirement | plan

Obama's Proposal on Retirement Plan Limits Unlikely to See Light of Day

By    |   Thursday, 05 February 2015 10:09 AM

Some financial commentators are getting hot and bothered about President Obama's proposal, as part of the budget, to cap contributions for tax-protected retirement plans, including 401(k)s and IRAs.

The proposal would prohibit contributions to a plan once its value has reached $3.4 million, an amount adequate to provide $210,000 of income a year in retirement, the White House estimates.

But before anyone gets too upset, realize that this proposal has zero chance of becoming law, since Republicans control Congress and won't approve it.

Much of Obama's budget represents a wish list to set an agenda for the 2016 campaign, not a blueprint for actual negotiations with Congress.

"I used to react to proposals and then realized, heck, most of them never get passed, and the ones that do are usually altered," Carolyn McClanahan, director of financial planning at Life Planning Partners, tells CNBC. "I've learned with politics, you worry about it when it actually happens."

Meanwhile, University of Georgia economist Jeffrey Dorfman is quite displeased with Obama's overall budget plan.

"What President Obama is really proposing is a spending increase of $343 billion. That would be an increase of over 9 percent above this year's levels and would result in the first $4 trillion budget in American history," Dorfman writes in an article for Forbes.

"With economic growth running at about 3 percent, the economy is adding about $530 billion to GDP annually. If you think about that as the new income that could go to either the private sector or the government, President Obama is proposing that the government take charge of 65 percent of the new money available in the economy."

Add in state and local government, and you have "the entire economy is facing a marginal tax rate of 67 percent," Dorfman says.

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Some financial commentators are getting hot and bothered about President Obama's proposal, as part of the budget, to cap contributions for tax-protected retirement plans, including 401(k)s and IRAs.
Obama, proposal, retirement, plan
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2015-09-05
Thursday, 05 February 2015 10:09 AM
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