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Will Obama Really Confiscate Your Retirement Savings?

http://www.fool.com/retirement/general/2013/04/21/will-obama-really-confiscate-your-retirement-savin.aspx

Dan Caplinger
April 21, 2013

The budget proposal President Obama recently submitted had several provisions designed to increase government tax revenue. But one provision concerning retirement accounts triggered alarm bells for many Americans, raising fears that the government will confiscate your retirement savings.

Why people think confiscation is possible
The provision in the Obama budget calls for tax laws to "prohibit individuals from accumulating over $3 million in tax-preferred retirement accounts." Specifically, the budget refers to a complicated formula that involves figuring out how much money a person would need in order to buy an annuity contract that would guarantee annual payments to retirees of $205,000 for the rest of their lives. The proposal would raise $9 billion over the next 10 years, according to the budget's forecast.

Immediately, many analysts jumped to the conclusion that the provision might involve actually taking away money from retirement accounts. CNBC's Larry Kudlow described the measure in a special editorial in the New York Sun as an "incredible and arbitrary limit or tax on -- or even possible confiscation of -- IRA-type tax-advantaged savings account [emphasis added]."

Past confiscation fears
Constitutionally, the idea that the government could simply confiscate your retirement savings without compensation goes directly against the due process and takings clauses of the Fifth Amendment. More skeptical analysts will note that retirement accounts make up trillions of dollars in assets that major banks Bank of America (NYSE: BAC) and Wells Fargo (NYSE: WFC) and many other major financial institutions use to drive profits, giving them a huge incentive to use their political power to ensure that those assets don't disappear instantaneously.

Yet this isn't the first time that the issue of confi