The federal government is proposing a public policy change that would essentially cap how much money Americans could save in some of their retirement accounts.Twenty-six-year-old Wayne Ramsey works hard and saves a good chunk of his earnings.
"The ways I try to invest in my future is just to be financially responsible to put aside for my 401k and take advantage of plans that are offered through my employer," Ramsey said.
Ramsey could be one of millions of Americans that would be financially affected by President Barack Obama's proposed cap on retirement accounts. Financial advisor John Kennedy said the cap affects IRA accounts and how much one saves.
"If you put a cap on investment amounts, then you are putting a penalty out there on someone who has maximized their contributions amount and done a good job of investing and done everything right," Kennedy said.
The cap would also affect 401ks, employee pension plans, and funds that are taxed upfront when you make deposits into retirement accounts.
"When you think about social security and that it probably isn't going to be there, then you should be wanting to encourage the younger generation. The government should be encouraging savings instead of penalizing the people that want to put aside the money," Ramsey said.
The proposed cap is $3.2 million dollars. Kennedy said many younger professionals are in so much personal debt that they won't have to worry about the cap.
"You can look at it as a penalty, but hurray for everyone who gets to $3.2 million," Kennedy said.
"I just think it's another way the government is interfering with enterprise," Ramsey said.
Kennedy said despite the cap, it's still safe to invest in your 401k. He also advised that people should have a backup plan.
"You never want to limit yourself. You need to have other savings. Put three months of salary in the bank then split the rest between 401k type of plans and ROTH."
This is still just a proposal, and no decision will be made until the end of this year.