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The White House has started its push to tap into americans' nest eggs.
President Obama unveiling his proposal the right retirement accounts at three million dollars but critics are warning.
The impact of his push could go will be on the super rich.
For more -- Jack -- high research director for the Employee Benefit Research Institute Jack welcome to the show is great to have you here.
We even talking -- for a long time on the show about how Washington would never be able to keep its paws off our retirement accounts and here we are faced with this.
You say this can go further and deeper than we expect -- so.
Well -- -- basically spent the weekend after initial details are released on Friday.
Using our database of about 2400000401.
K participants -- twenty million IRA holders.
To figure out what the impact could be immediately.
Much more importantly in the long run.
Short term only about 110.
The individuals that are sixty or older would actually be hit by the three million dollar cap.
But that's very very misleading because if you take a close look at the proposal it's not actually three million.
It's enough money to buy an annual benefit.
Dollars and because of the interest rates being out is that I don't know any just to clarify coward act right.
And and because -- interest rates are an all time low when they come back to normal when interest rates are pleased you're going to find that -- had.
Valued at three million dollar cap will be reduced substantially.
I went bad just only to November of 2006 I was able to find.
Annuity purchase price is as you mentioned.
There were high enough to basically reduce -- three million dollar cap all the way down to 2.2 million.
And then model lit for the people who are currently in the system and we find as many as 5%.
Wow just looking at 401 cage as many as 5%.
Of the 401K participants are likely bump up against a -- it.
Would get eight point five trillion dollars in retirement assets and I believe the Washington politicians would like to get their hands on a piece of it.
You say -- couldn't even get worse as interest rates start to to spike up.
And again right -- it's happening is you're going from a very small percentage day.
Because 401K plans have not been in existence long enough for most of today's sixty year olds so -- only about 110 of 1% being hit today.
But over the course of time about 5% of those individuals as they mature into the system.
As interest rates go back to normal.
We'll probably be bumped up against this and what that means is you will no longer be able to put contributions.
Into your particular -- -- Go ahead and go ahead Jack -- and the important thing is something they just released this afternoon.
That this is not only going to apply it to 401K defined contribution -- tire is it will also -- you're defined benefit.
Accruals into this so if you've got somebody who's currently in a situation where maybe extraordinary example -- 200000 dollar.
Balance are ready for their defined benefit accrual that leaves only 5000 dollars extra.
For that annuity for your combination of 401K and IRA.
RA and the take away this segment is that more people will be hit than you expect.
And we expected originally we have precious few details as you said on this plan from the White House.
But something you said to our producer caught -- I -- said that over time employee -- employers.
May be discouraged to having some kind of retirement plan because of the paperwork associated with this explains.
Well one of the things that's going to have to happen is.
The plan sponsors.
And the -- record keepers are going to have to report -- account balances each and every year -- something like this to be monitored.
In addition to -- keep in mind that although this could be administrative nightmare for all 401K sponsors.
Especially the smaller sponsors if you have an individual who basically is are -- close to the cap free himself for her self.
Is there really any reason to continue to make employer contributions.
For the rest of the employees if he -- she basically has nothing else to get from the plan.
It's a big problem looming on the horizon Jack thanks for coming on today really appreciate your time.
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