, Newburyport, MA


January 3, 2013

Administration wants your retirement plan to avert fiscal cliff

The ever-expanding debate on averting financial consequences has refocused attention on concerns that the coveted 401k plan and IRAs, long considered the last bastions of private retirement savings that replaced pensions for most working Americans, may be tapped. The plans may be slated for dramatic changes ranging from limiting deductions to retroactive taxation and to possibly include a nationalization scheme by imposing government-mandated plans on employers with savings allocated exclusively to Treasury bonds.

An Investment Company Institute study published last month illustrates that U.S. retirement assets at the end of second quarter 2012 total $18.5 trillion. Two components are $3.5 trillion in IRAs and $5.1 trillion in 401k plans. These therefore present very tempting deficit-funding sources for the Obama administration to help fund a spiraling budget deficit that is approaching $20 trillion.

By restricting the deductions of monies flowing into these plans for the highest wage earners or, as some reports have suggested, retroactively taking back already deducted amounts, plan assets could be reduced and resources effectively transferred through taxation back to government coffers to help pay down government debt.

In response to this threat The American Society of Pension Professionals and Actuaries has launched a national campaign to educate the public known as “Save Our 401Ks.” With over 11,000 member firms consisting of broker-dealers and retirement plan service firms, the campaign is part public lobbying effort and part public education effort.

Brian Graff, executive director and CEO of ASPPA, criticized Obama’s proposal to limit the tax benefit for retirement savings for families earning more than $250,000 and categorized it as “a bad proposal based on bad math.”

Graff went on to say, “The tax break for retirement savings is a deferral, not a permanent write-off. Under the president’s budget, these taxpayers wouldn’t just lose a current tax break, they would actually be penalized for saving – paying taxes now and taxes later.” This, Graff continues, “will discourage small business owners from setting up or maintaining retirement savings plans for their employees. Workers that lose workplace retirement savings plans will be the ones that really pay for this misguided proposal.”

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