The Number of People With IRAs Worth $5 Million Or More Has Tripled, Congress Says | Talking Points Memo

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#40

My first point here is that it’s not a scandal or abusive when a 401k worked as advertised and expected when it was held up as a perfect replacement for pensions. The scandal is that there are so few people with 401k’s that worked as advertised after 30 years, not that a few such people exist.

My second point is that because five million is about where an employee who did what the law’s proponents insisted most middle class workers could and should do over 30 years with employers doing what was then expected to be the bare minimum to help, it’s wrong to use that amount as some kind of populist guillotine threshold rather than an amount that would have been impossible absent manipulation. There is such a number. I’ve identified an easy, obvious metric to determine that threshold that ProPublica could and would have found if it had bothered to talk to people who had actual expertise rather than just going with leftist sophomore outrage that there are old people who managed to save a lot of money. Its a mistake consistent with the naïveté that’s undermined the usefulness of all of of ProPublica’s tax abuse reporting in identifying the change actually needed.

Because yes, the one of the real scandals here isn’t that there are a few people for whom the 401k model worked as advertised but, rather, that there are so few of them. The other scandal, which it chose to bury under leftist puritanical outrage that anyone managed to save a lot of money is that there are people who have more in 401ks than it is possible for them to have absent abusive manipulation of the law to tax shelter senior executive compensation.

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#41

The article is about IRAs, not 401Ks.

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#42

When you are separated from service, it does make sense to convert a company-sponsored plan (401k or the like) to a personal Plan (IRA) under current inheritance regs. Also, some companies force you to leave their plans when you leave.

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#43

Excellent run down - thank you. You’re right. If the laws worked as they were intended, 401Ks would have been a benefit to most workers. Because there was so much abuse of the system primarily by corporations large and small, most people are inadequately prepared for retirement and a few have far more than should technically be possible in their 401Ks.

OTOH, the Roth IRAs were designed to be abused by the wealthy - everything about them invites manipulation by those that have money to spare while providing next to nothing to those that aren’t so well set, starting with allowing people to transfer out large sums from their regular IRAs for some number of years.

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#44

So rich folks have $5 million in their IRA.

Guess they didn’t pay 18 years of child support and pay off thousands of dollars of their parent’s medical bills that insurance company bean counters refused to reimburse.

Well, there’s always the next Powerball or MegaMillions jackpot…

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#45

I am lucky enough to have a small Roth IRA. I set it up because I have a Roth component in my 401k with a small employer match and I will leave no money on the table and will, in the next few years, need a Roth IRA to roll it into.

But now, as always, I marvel at what possible legitimate purpose it was meant to serve.

It’s like my HSA. I keep a low balance in it and pay my doctor and prescription bills with a regular credit card (for the points). I periodically make a deposit from checking to the HSA and reimburse myself for the healthcare expenses I paid on my credit card, magically turning a non-deductible health care expense into a deductible healthcare expense. All perfectly legal but it feels like money laundering.

This is, of course, only feasible if you have enough money to not miss the money while it goes from checking to the HSA and then back to the checking account. And thus the effect is to enable the affluent to deduct their co-pays and out-of-pocket expenses, but not the working poor with bronze level plans who most need for their co-pays and OOP’s to be deductible.

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#46

$5 million should be possible if someone started early, had a large enough salary for their entire working life, and they didn’t run into periods of joblessness or employers that messed with the allocations, etc., but that’s a lot of ifs and it skews heavily toward the white collar class.

At some point, most of them figure out that they can do better if they don’t lock money into a 401K or IRA - withdrawals from 401Ks and IRAs are taxed as regular income (even if you’ve lost money on those investments) and the government requires minimum withdrawals after age 70. Roth IRAs or just normal investments are much more attractive with fewer restrictions and a lot lower taxes. Those folks will put enough in to get their employer match and put the rest of their savings elsewhere.

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#47

I decided early in my career to pay my taxes up front and not trust the government to honor any promises vis a vis retirement savings. I’ve been self- employed for over 30 years after 14 years at a large corporation, so I knew I was on my own. Early on, my taxes were extremely low (lots of deductions) so paying then made sense. I couldn’t figure any way the powers that be would leave the assets of the middle class sitting on the table - and they didn’t. I also figured that any vehicle used by the wealthy would be carefully protected (capital gains, etc.) As a younger boomer, there were lots of changes to corporate structures and benefits packages over the years, none of them to the advantage of the worker-bee. I feel like I made pretty good decisions overall.

#48

Good point. The people using this loophole are very wise in the art of manipulating their basis.

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#49

It’s dumbfounding that a guy worth $4,500,000,000 can slip into a Roth IRA at all. A single person making more than $76k is not supposed to be eligible to contribute to an IRA and if one makes more than $140k he/she can’t contribute to a Roth IRA.

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#50

Yes Roth IRA abuse needs to stop. Especially if valuations are being manipulated.

I would hardly call anyone with a 5 Million retirement account Mega Wealthy.

If I recall correctly 7000 was limit on IRA contribution for traditional IRA is there no limit on Roth?

#51

For the rest of this rabble, IRA’s make their language confusing and there are different kinds that are only subtly different but have all these weird regs.
But hahah those with military family members and teachers - my seven hundred dollars is safe from your rapacious tax-funded salaries. The joke’s on you!

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#52

I’m not interest - ed.

#53

Don’t you worry, M. I know with your grit an determination that you’ll make Denny’s Manager one day.

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#54

this

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#55

Too old. Plus which the last job I had in the industry literally had the title “salad assistant.”

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#56

Save 10% of your paycheck every month!
What?
You find that hard when you are making minimum wage? Clearly your terrible personality and weakness are to blame.

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#57

Have you thought about night school to learn about copier repair?

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#58

Listen to you. Everyone with 40 bucks or so to spare has a multifunction machine to do that stuff and if it breaks they throw it out and get another. Career-advise better.

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#59

Uh-oh!

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