The headline from the right wing prepper web site reads: Obama Turns America’s Retirement Dreams into Nightmares. The lead graphic from the article shows Barack Obama, squeezing a white collar worker, and declaring, “I Want Your Retirement Account”.
The article warns: “If you think the U.S. government will not – or cannot – seize your money the way the government in Cyprus is doing, check out page 18 of the President’s Proposed Fiscal Year 2014 Budget of the U.S. Government.
That’s exactly what he intends to do.
Not years from now. Not decades from now.
It sounds frightening, as if Barack Obama wants to take away Americans’ retirement accounts, stealing the money that they’ve worked hard to accumulate for their entire lives.
Is it true? The full answer is complicated, but the short answer is this: Yes, and no.
President Obama does have a plan to withhold Americans’ retirement income from them – money that they’ve earned through Social Security. However, that plan is called chained CPI, which reduces senior citizens’ cost of living increases. It’s a plan that Barack Obama developed in cooperation with the Republican Party and right wing Democrats.
What the government of Cyprus did was to place a temporary tax on withdrawals from certain sorts of bank accounts. That’s not “exactly” what Barack Obama has suggested in his latest budget proposal. It’s not really even anywhere close.
When encountering extreme and alarming claims, it’s helpful to look at the original materials upon which the claims are based. With that in mind, here’s the language from Barack Obama’s budget proposal to which Pakalert Press refers:
“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.”
As is clear in this language, Barack Obama’s plan would not take anyone’s retirement plan away from it. The plan would, if implemented, simply place a cap for tax write-offs associated with retirement plans. That cap would be three million dollars. Americans would be free to continue investing in retirement plans above more than three million dollars. The only thing that would change would be that, after an individual had three million dollars in their retirement account, additional money to be invested would be subject to income taxes, just like income ordinarily is.
If you think this is an outrageous plan, think about this: Do you know anyone who actually has three million dollars invested in a retirement plan? The odds are you don’t – but if you do, consider this millionaire you know. Is this person struggling financially so much that he or she could not reasonably afford to pay the ordinary amount of income taxes?
Think about what three million dollars in retirement investment is capable of. Even if a person retiring at age 65 lived another 30 years (10 to additional 15 years is what may be more reasonably expected), then that person could spend 100,000 dollars tax free. Social Security income would be in addition to that. What’s more, the actual amount of money available to the retiree would be even greater than this, because the three million dollars of investment income would continue to grow every year, thanks to the hard labor of people still working for a living.
Does that sound like a retirement nightmare to you?