“I think we won’t have to limit or change rules midstrem if only publicly traded ssests are allowed in retirement accounts. That’s simpler for everyone concerned and easier to enforce. My question is why not tweak the existig rule a bit to level the playing field? Why create new rules and add another layer of bureaucacy?”
It’s because the goal isn’t to actually get more tax money from the ultra rich donors. They want to rant and rave about them, pretend like they are the ones who will be affected, but they won’t be. They are really not trying to level the playing field for those people, but everyone below them who has no power and can’t fork up the big bucks. New rules and new bureaucracy is considered a good thing in some administrations. More control, more government workers. Business might be bad all over, but it’s booming in Washington.
The ira program was set up for retirement. Now people are using the program to increase the assets they leave to heirs. We are going to change the ira program to make it what is was suposed to be…a retirement program.
@dstark, I’d love to live long enough to spend it all, and to have my lovely wife by my side. And perhaps we will, but I’m afraid that some of it is quite likely to go to my heirs. The IRAs are for retirement, but the last thing my kids need is for us to run out of money before we die By some calculations, we should have stopped saving some time ago, but it’s a hard habit to break.
But, I don’t mind saving without tax advantages. Our taxable/tax-advantaged is close to 50/50 now, and 2015 I think will be the year that taxable is larger than tax-advantaged.
If only we knew exactly what we needed for retirement. If we knew we were going to die the day after we retired, we’d stop saving and start spending right now. If we knew we were going to live another 50 years, uh oh, we’d start working harder and saving a little more. If only we knew whether we’d need to go to nursing homes, have serious illnesses or large expenses. If we knew we’d lose our interest in life pretty quickly and not want to do anything but sit on the couch and stare at the tv, we’d know we wouldn’t have to save much money. If we knew that our kids were always going to be healthy, prosperous and out of trouble (and their kids too), we wouldn’t worry about leaving them the few dollars that are left after the government gets its share.
The problem is, none of us know. Sure, IRA’s are supposed to be for retirement, and chocolate cake is supposed to be for dessert, but if it’s sitting in my refrigerator, I’m having it for breakfast. So tax me!
But the people who are really taking advantage of the program aren’t the ones who are diligently squirreling away ordinary income, saving and investing well for 40 years. We all know who it is, and nobody seems interested in stopping that kind of scam.
Yes, it would be really bad if things are done to DISCOURAGE savings. Cutting the scams is a great idea but leave the folks who are saving diligently for a comfortable (or better) retirement and who want to maybe help their loved ones and perhaps help their kids or grandkids alone!
I’ll bet the proposals go absolutely nowhere, and even if they did, the fine print would protect the important people. The Kennedy trust fund and the like would remain untouched.
Some of us have the genetics to live a very long time, but may live a significant proportion of it with serious chronic health conditions. As we know from prior experience & the top thread in this Parent Cafe, such care can be quite costly. I definitely want H & me to have enough to care for ourselves and not be a burden to our kids or loved ones. I feel grateful that my folks have saved so that they will also not be a burden to us financially.
There is also the question of how much a retired person depends. Suppose someone used to spending $350K after tax wants to continue doing so. Should they not be able to save enough in their IRA to be able to do so?. They will pay taxes on the money they withdraw. But they are deferring taxes.
Some folks with chronic health conditions have high out of pocket expenses for their medications and frequent hospitalizations–how should these be included in retirement or other accounts? These seem very important to be considered, especially as folks live longer and longer.
@shawbridge, at that level of withdrawal, they will be paying more in taxes than if they had just invested in taxable (albeit deferred). Rather than taxes on cap gains and qualified dividends, ie, lower, they will be paying at the max (or near max) earned income tax rates, ie, higher. Good for the other taxpayers
What would interest me is if we can agree who should take how much tax burden. I know it’s not simple because of deduction and the way income is counted. If we can ignore that for now, we know bottom 50% doesn’t pay tax. It’s up to top 50% earners. I am playing around with numbers; 50-75% income bracket pay about 50% of total tax, 75-90% bracket pay 25%, 90-95% bracket 10%, 95-99% 3%, the top 1% 2%?
The top 1% paid 38% of income taxes and made 22% of income,
The 95-99% paid 21% of income taxes and made 15% of income.
The 90-95% paid 11% of income taxes and made 11% of income.
The 75-90% paid 16% of income taxes and made 21% of income.
The 50-75% paid 11% of income taxes and made 20% of income.
The bottom 90% pays 30% of the income tax and has 52% of all income.
The current system is already far more progressive than the numbers you are playing around with. The top 1% pays more than the bottom 90% combined, at a combined rate of 3x what the bottom 90% pay.
“For historical perspective, back in 1986, the top 1% of earners reported 11% of all income and paid 26% of the income taxes; the lower-earning 50% made 17% of the income and paid 6% of the nation’s individual income tax bill.”
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