The Glade 4.0

That's preposterous, Khross. Obama doesn't want a Constitution.

Facism is not a school of thought, it is a racial slur.

You realize that supporting the current Administration in any way whatsoever after their behavior this year is tantamount to admitting you want a new Constitution, right?

Yes, really. Bear in mind that I'm not actually staking out a position on this policy proposal, as I haven't thought about it enough to have a firm opinion.

Facism is not a school of thought, it is a racial slur.

I do think at a certain point you’ve made enough money.

Facism is not a school of thought, it is a racial slur.

I wonder how these limitations will affect our elected representatives ridiculous retirement packages? (i'm guessing it won't).

Okay...guys...

First of all, I outright disagree with capping tax-free retirement savings, that sounds like a terrible idea for a whole lot of reasons I'm not going to go into. So listen closely to what I'm going to say next.

RangerDave, playing devil's advocate, questioned this assumption completely reasonable and rational way with sensible arguments that you didn't even begin to address. You just screamed outrage and claimed he's slid off the rails.

Let's assume paying your taxes is an obligation. Let's also assume the tax rate is reasonable (personally, I think it is much too high, but that's not the point here.) The government is not somehow obligated to ensure you are not paying any taxes on your retirement savings. There's good economic reasons for doing so (and, in fact those reasons are even more valid, since income tax is so high), but it's not like he's proposing taking away people's savings. Even Obama isn't proposing that. He is not proposing "Capping wealth." He's proposing eliminating the tax advantage to retirement savings beyond a certain level of savings. Suddenly, you have to pay income tax on investment income made by the portion of your retirement savings that exceeds X dollars. Bad idea? Sure. But it is not what you are claiming it is.

That tax advantage is nothing more than societal engineering. It's part of government meddling in the economy, necessitated by other government meddling in the economy. It is a product of the nanny-state. RD is not "off the rails" here.

Anyhoo ;-p not that I really care, given obama doesn't yet have any control over my pension, and our government is far more likely to steal it than yours. So far.

Facism is not a school of thought, it is a racial slur.

Facism is not a school of thought, it is a racial slur.

If you do a Roth IRA, isn't it mostly tax-free? You have to put post-tax money in, but the gains never get taxed.

Xequecal:

Both IRAs already have capped contributions chained to in-year income. You cannot make contributions from other savings or holdings. Neither IRA can use be used as savings collateral or proof of financial leverage. They are statutorily disallowed from credit calculations. Roth IRAs have different withdrawal mechanisms. Pre-Retirement withdrawals on Roth IRAs are not taxed, but the gimmick here is rather fantastic: growth doesn't capitalize to the account holder until they are 59 and a half. As such, any pre-retirement withdrawal on a Roth IRA is principle only and reduces their floating gains for capitalization accordingly. Likewise, because the growth is held in suspense until the account holder reaches 59.5 and starts withdrawing, the managing entity actually does pay all of those taxes on the money; not the account holder. So it appears immune to capital gains on paper, but it's not in practice (as RangerDave can assuredly tell you). And it's first-in, first-out on principle adjustments and growth recalculations.

Once the annuity starts paying, it is subject to all sorts of fantastic taxes just as if it were normal income, except for the principle. However, maximum statutory principle in a Roth IRA at 59 and a half is just under 250,000 US Dollars, assuming you can keep up with contributions EVERY year. So, the amount of money tax free that he has a problem with, is less than 10% of the cap he's proposing on your capitalize principle. And, oddly enough, the taxes and caps set in that amendment to his budget wouldn't affect Roth IRAs until you could withdraw. Understanding American tax law and retirement vehicles means this position is exactly what I said it: horrendous.

Traditional IRAs scale a little better on contributions, capitalize principle yearly, and only give you a break on your AGI in year.

Obama's plan is a TAX on wealth and in the case of both IRAs, a TAX on retirement investing.

The biggest advantage of both, as it stands, is forcing an investor to sink money and wait; the second biggest advantage is that they are creditor immune.

Up until now, Social Security has been a windfall for many retirees: They collected far more in benefits than they shelled out in taxes.

That's changing. Many of those retiring will have paid more into the coveted entitlement program than they will get back.

Here are the numbers:

A couple who each earned the average wage during their careers and retired in 1990 would have paid $316,000 in Social Security taxes, but collected $436,000 in benefits, according to data crunched by Eugene Steuerle, an economist at the Urban Institute.

Had that couple turned 65 in 2010, however, they would have paid $600,000 in taxes, but could expect to collect just $579,000. This is the first time in the program's history that taxes outweighed benefits for this group, a couple with average earnings.

The imbalance will get more pronounced for future generations of retirees. Couples now in their early 40s will have forked over $808,000 in Social Security taxes by the time they retire, but get back only $703,000 in benefits.

The Urban Institute included payroll taxes paid by both the employee and employer, but did not include the portion used for Social Security's disability insurance program. Since 2000, taxes for just the retirement program have totaled 10.6% -- 5.3% from the employee and the same from the employer. The levy is paid on income up to a certain threshold -- $113,700 for 2013. The institute said it adjusted its calculations for inflation plus 2%, about what a person could have traditionally realized in savings had they put the money in the bank.

So why is the shift happening now? It's because the first waves of recipients saw their promised benefits rise without sufficiently large tax increases to pay for them, Steuerle said. Rates rose significantly after the program was overhauled in 1983.

"Younger generations are paying much higher tax rates for the same benefits," he said.

Still, there are many folks who will collect more than they'll have paid. The typical American couple do not each earn the average wage during their careers since women often have lower incomes or take years off to raise children. In this scenario, the couple would receive more benefits than they pay in taxes because the wife's checks often will be based on her husband's earnings. Also, most lower-wage workers receive more in benefits than they pay in taxes.

To be clear, Social Security, created in 1935, doesn't operate like a savings account. Today's workers' taxes are funding the monthly checks being sent to today's retirees.

When it comes to Medicare, however, virtually all Americans are getting far more than they pay in taxes, which is 2.9% on all of one's income, not including the new 0.9% surtax on high earners. The couple turning 65 in 2010 paid a scant $122,000 in Medicare taxes, but can expect to get $427,000 in benefits.

And that pattern isn't reversing any time soon ... the spread actually widens for future generations.

Though many people are now putting more into Social Security than they will take out doesn't mean the entitlement program is on sound footing. A big part of the problem is that there are fewer workers to support the growing number of retirees.

The system is now paying out more in benefits than it collects in income, with the difference coming from the so-called trust fund, the result of surplus revenue previously paid into the system. But the trust fund is set to run out in 2033, after which the program will only be able to pay about three-quarters of promised benefits, according to the Social Security trustees.

"What we are paying into the system is paying for our parents' benefits," Steuerle said. "But it's not clear what that entitles us to get from our kids."

In comic strips the person on the left always speaks first. - George Carlin