Grand Rapids, MI -- (SBWIRE) -- 04/19/2013 -- In our modern world it is difficult to stay on top of everything that is happening financially. Dennis Tubbergen, a financial advisor, author, radio show host and CEO of PLP Advisors, LLC can be counted on to give a little help when it comes to understanding the latest events in U.S. and world economics.

Whether people enjoy his weekly newsletter at www.moving-markets.com or his blog at www.dennistubbergen.com, Tubbergen is dedicated to sharing his viewpoints and opinions. On April 12, his blog was titled Obama's Budget to Limit IRA Investment Levels?

"President Obama's budget, according to a Bloomberg article published recently, will limit investment levels in IRAs and other retirement accounts to $3 million," began Tubbergen. "To be fair, the details of the proposal are not clear, but the fact that the idea of retirement account investment limits are even being discussed should be very alarming to everyone."

Tubbergen quotes below from the April 5, 2013 Bloomberg.com article.

President Barack Obama's budget proposal would cap multimillion-dollar tax-favored retirement accounts like the one held by Mitt Romney, his Republican rival in 2012.

Obama's budget plan, to be unveiled April 10, would prohibit taxpayers from accumulating more than $3 million in an individual retirement account. That proposal would generate $9 billion in revenue for the Treasury over the next decade, according to a White House statement released today.

"Under current rules, some wealthy individuals are able to accumulate many millions of dollars in these accounts, substantially more than is needed to fund reasonable levels of retirement savings," the statement said.

The most prominent taxpayer with a multimillion-dollar IRA is Romney, the 2012 Republican presidential nominee and co-founder of Bain Capital LLC. Romney disclosed in public filings during the campaign that his retirement account held between $18.1 million and $87.4 million. At one point, the maximum exceeded $100 million.

IRAs have evolved from a retirement-planning technique into an estate-planning tool for some wealthy families because tax laws allow the accounts to be passed on to heirs, said Ed Slott, an IRA specialist and certified public accountant based in Rockville Centre, New York.

"Over the last election it hit a critical mass when a lot of people found out that Romney had $100 million in his IRA," Slott said. "People thought, how on earth did that happen? I think that was the tipping point."

The Romney campaign didn't explain how he amassed that much money in an IRA when contribution limits are much lower. Most taxpayers can contribute a maximum of $5,500 for 2013. Older workers, self-employed workers and those who save through 401(k)-style plans have higher caps and can roll those accounts into IRAs.

"First, let me talk about how Mr. Romney could accumulate that much money in a retirement account," explained Tubbergen. "As the article states, contribution limits to a retirement account are determined by the IRS and may increase year to year. While the article correctly states that IRA contribution limits are $5,500 this year, it fails to point out the other types of retirement accounts that allow much larger contributions."

Tubbergen goes on to state that a plan such as a defined benefit plan allows for contributions large enough to fund a specific level of pension income at retirement. If a company were to adopt one of these types of plans, contributions to the plan are made for each plan participant with older participants potentially getting a larger contribution than a younger plan participant due to the fact that the contribution will have a shorter time in which to grow.

For example, a 50-year-old who will be collecting $2,000 per month at retirement might require a larger plan contribution than a 30-year-old who will be collecting the same $2,000 per month at the same retirement age. Presumably, the contribution made for the 30-year-old will have longer to grow than the contribution made for the 50-year-old.

If these plans are terminated, the plan balance allocated to a plan participant can be rolled to an IRA account. It's likely that Mr. Romney had a plan along these lines and, as the article states, it's also almost a certainty that the investments in the plan grew exponentially.

"Here is what the article doesn't state," notes Tubbergen. "The IRS owns about 40 percent of Mr. Romney's retirement account. In spite of the fact that during the election much hype surrounded the fact that Mr. Romney paid a tax rate on his inome in the 15 percent range due to much of the income being from capital gains and dividends, that will all change for Mr. Romney when he reaches the age of 70 and a half."

Tubbergen continues by saying at that point, Mr. Romney will be required to take required minimum distributions from his retirement plan. Assuming a balance of $100 million in his IRA at that point, Mr. Romney's required minimum distribution from the plan would be between $3.5 and $4 million. That distribution would be taxed at ordinary income tax rates, currently 39.6 percent.

"The very important point here is that as an IRA account grows for the investor, it also grows for the IRS," states Tubbergen. "And, assuming tax rates in the future are higher, the IRS' share can even grow disproportionately to the share of the investor."

Tubbergen goes on to say another unintended consequence of this potential new legislation should it become law is that retirement plans at employers may cease to exist in the same numbers that they do today, making it harder for the ever-shrinking middle class to conveniently save for retirement.

"Given the current tax trends and fiscal condition of the U.S., why would anyone want a joint account with the IRS, considering that if future tax rates are higher than today, the IRS' share grows?" asks Tubbergen.

"If you are already retired, you might consider ways to get the IRS out of your retirement account in a tax-efficient way," he concludes. "You can visit www.RetirementPlanTaxes.com to get a free copy of a report I just published on the topic."

To read the blog in its entirety go to http://www.dennistubbergen.com and select his April 12, 2013 entry.

Tubbergen’s syndicated radio show can be heard on metro Michigan stations WTKG 1230 AM and WOOD Newsradio1300 AM and 106.9 FM.

About Dennis Tubbergen
Dennis Tubbergen has been in the financial industry for over 25 years and has his corporate offices in Grand Rapids, Michigan. Tubbergen is CEO of PLP Advisors, LLC and has an online blog that can be read at www.dennistubbergen.com. To view Tubbergen’s latest Moving Markets? newsletter, go to www.moving-markets.com.

The opinions expressed herein are those of the writer and not necessarily those of USA Wealth Management, LLC. This update may contain forward-looking statements, including, but not limited to, statements as to future events that involve various risks and uncertainties. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual events or results to differ materially from those that were forecasted. Therefore, no forecast should be construed as a guarantee. Prior to making any investment decision, individuals should consult a professional to determine the risks, costs, benefits and fees associated with a particular investment. Information obtained from third party resources is believed to be reliable but the accuracy cannot be guaranteed.