2016 federal budget proposals

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Rodger On Retirement

You have been steadfast about saving and investing for your retirement.

You “max out” both your 401(K) contributions as well as your IRA.

You follow the rules to make the most of smart retirement investing under current law.

You have a comprehensive financial plan crafted by your advisory team and follow it diligently. Congratulations!

If Mr. Obama gets his way, a greater portion of your retirement funds will find their way into the U.S. Treasury. The laundry list of items included in this year’s 2016 federal budget proposal sounds like a bureaucrat’s idea of heaven. In other words, finding more and more ways to transfer money from the people who take saving and investing for retirement seriously, and placing them in federal coffers.

Understand, I do not have a problem with all the proposals I reviewed. But some of them are just down right unfair.

We are all too aware that the government gives and the government takes away. Here is a sampling of what the government would like to take away, or at least, curtail in order to raise the amount of revenue flowing into the U.S. Treasury. Bear in mind, that at present, these are only proposals.

  • The after -tax money you hold in your traditional IRA or an employer-sponsored retirement plan, such as a 401(K) would no longer be eligible for conversion to a ROTH account.
  • The required minimum distribution rules (RMD’s) that apply to traditional IRA’s would also apply to ROTH IRA’s. In other words, you would be forced to withdraw funds at age 70 ½ from your ROTH.
  • For individuals in higher tax brackets, there would be a 28% maximum tax benefit for contributions to retirement accounts. So if you were in the 33%, 35% or 39.6% ordinary income tax bracket, you would no longer receive a full deduction for the amount you contributed to your retirement plan.
  • For individuals who have worked for public corporations and hold common stock of the company in their retirement plans, they would no longer be eligible for a special tax savings device known as NUA, or net unrealized appreciation strategy.
  • The “stretch IRA” for non-spouse beneficiaries would effectively be ended with a new rule mandating that all funds must be withdrawn by the end of the fifth year.
  • For those that have been very successful in growing the size of their tax deferred retirement plans, the government would place a cap on any new contributions to your plans once your account size has exceeded an established cap.

My team and I assist retirement minded individuals every day to make smarter decisions for their retirement. The changes to the retirement landscape put forth by the White House do not help these people and their families. It shifts more of their hard earned dollars to the federal treasury.

Space does not permit me to give you the entire picture of the changes your government would like for 2016. But feel free to get the whole story byaccessing:https://www.whitehouse.gov/omb/budget

Copyright 2015 by Rodger A. Friedman
Forging Bonds of Steel, LLC

2015-4                                                                                                                       029829

*The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Rodger Friedman and not necessarily those of RJFS or Raymond James.