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Missed Fortune – Why Government Is Interested In Your Retirement Savings

Posted on | April 15, 2013

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You’re Too Successful

You’ve heard about the government of Cyprus seizing money from its citizen’s bank accounts. But Cypriots aren’t the only ones who need to be concerned about the safety of their savings.

President Obama’s budget, which was recently released, will limit how much wealthy individuals may keep in IRAs and other retirement accounts. This proposal would bring in around $9 billion over a decade according to a senior administration official.

The thinking behind these proposed limits is that wealthy individuals can save much more money in IRAs or 401(k)s than is necessary to fund a “reasonable” retirement. In other words, if you are too successful and save too much money, this administration official is saying that you must take some of yours and give it to those who didn’t save.

This is nothing new. We saw it back in the 1990s before they repealed the so-called “success” tax in 1997. This was a favorite redistribution of wealth tax in that if you were deemed too successful in saving money in your retirement account, you were dinged with an extra 15% excise tax.

Pay attention, the “success” tax is being brought back.

People around the world are facing similar government attempts to grab a portion of their retirement savings. Australian citizens who have responsibly set aside savings for their own retirements are also facing a proposed new 15% tax on all their income over $100,000 drawn from their equivalent of an IRA.

What makes this appalling is the fact that this income is supposed to be tax-free because they’ve already paid the tax before they put their money in the account. They’re being taxed on both ends.

The bottom line is that people who government considers “rich” have a huge target on their backs. If it can happen to others, it can happen to us.

Protecting Your Money Is Paramount

Highly successful people can still make foolish decisions. They follow the crowd and keep their retirement saving in IRAs and 401(k)s. They assume that they’ll be in a lower tax bracket at retirement and not outlive their money.

But sometimes they don’t know what they don’t know.

When they learn that they can do what’s called a strategic rollout that allows them to do a conversion of their money from their IRAs and 401(k)s into a truly tax-free vehicle, they cheer. Then they tell their successful friends.

You deserve a most amazing future. But to get there you’ll have to cut through the noise to learn what you can control and what matters most. Where most Americans default and keep doing what they’ve always done, you must instead learn to focus your time and money on today’s best choices.

We all have good intentions. But we all face distractions, we fall behind, and we can eventually run out of time by doing the same thing over and over while expecting different results.

The best choices are readily available once you know what they are.

The best ways to protect your retirement nest egg keep your money tax-free. They allow inflation to actually help you by tying your returns to those things that inflate. When the markets are volatile, these strategies protect your money so you don’t lose principle, yet they allow you to participate in any market upside the moment the markets recover.

The best ways of protecting your retirement savings allow you to enjoy liquid assets safely earning predictable rates of return.

Take the first step by visiting with a wealth architect today.

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*Life insurance policies are not investments and, accordingly, should not be purchased as an investment

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