Obama’s Budget Would Limit Your IRA and 401(k)

His new budget (Budget of the U.S. Government (200+ pages)) claims that

It is our generation’s task to reignite the true engine of America’s economic growth — a rising, thriving middle class.

What could be better? There’s more:

It is our unfinished task to make sure that this Government works on behalf of the many, and not just the few; that it encourages free enterprise, rewards individual initiative, and opens the doors of opportunity to every child across this great Nation.

And an important goal:

A growing economy that creates good, middle class jobs — this must be the North Star that guides our efforts.

Here’s the tite for Part I:

STRENGTHENING THE MIDDLE CLASS AND MAKING AMERICA A MAGNET FOR JOBS

Now we can get into the details.

Encourage Retirement Savings with Automatic Individual Retirement Accounts and Support for Small Employers Who Offer Retirement Plans

Sounds good so far.

The Budget would automatically enroll workers without employer-based retirement plans in IRAs through payroll deposit contributions at their workplace. The contributions would be voluntary …

There are, of course, no details about who or which companies would provide these IRAs.

Now for the bombshell (my emphasis below):

Prohibit Individuals from Accumulating Over $3 Million in Tax-Preferred Retirement Accounts.

Individual Retirement Accounts and other tax-preferred savings vehicles are intended to help middle class families save for retirement. But under current rules, some wealthy individuals are able to accumulate many millions of dollars in these accounts, substantially more than is needed to fund reasonable levels of retirement saving.

The Budget would limit an individual’s total balance across tax-preferred accounts to an amount sufficient to finance an annuity of not more than $205,000 per year in retirement, or about $3 million for someone retiring in 2013. This proposal would raise $9 billion over 10 years.

Those numbers ($3 million, $205,000) weren’t just pulled out of a hat. They’re tied to interest rates, pension regulations, and the cost-of-living index. So as interest rates rise in the future (where else can they go), the %3 million maximum will come down.

But the main point here is, Where does the government (which is supposed to be ours – yours and mine) get off telling us what is substantially more than is needed?