Wake up to the Obama tax radar screenBlog added by Paul Cross on November 28, 2012
Paul Cross

Paul Cross

Pekin, IL

Joined: December 21, 2006

No financial asset is off the fiscal tax radar screen. Retirement plans, wealth accumulation accounts and especially 401(k)s are on the list of new tax revenue sources.

All aspects of generating larger tax revenue, with one exception, will have an impact on the financial well being of many. Consider the impact of eliminating the capital gains tax and the stepped up cost basis. It may not have a measurable effect on Warren Buffet, but it will have a negative impact on many investors, causing stock market declines and losses in 401(k)s and other retirement plans. Taxing the accumulated value in 401(k)s would have a compounding loss on Wall Street.

According to an article in Time Magazine, the 401(k) was never intended to be a retirement plan. However, it is the mindset of 77 million baby boomers and younger generations that their 401(k) plans are, indeed, retirement plans. And, many companies implemented 401(k) plans with some form of matching contributions to reduce and/or eliminate company pension plans. Now the 401(k) plans are not only subjected to losses in the stock market, but they are also on the fiscal tax radar screen, which could cause further compounding losses.

Some believe that the fiscal cliff action and Obamacare will only impact the super-wealthy and health insurance carriers — well, consider the above very closely.


Life insurance cash values and annuity acccumulated values are visible on the fiscal tax radar screen. Who knows where or how deep it will go?

While we have no assurance or guarantees, the one factor we have in our favor is that, historically, tax changes relative to both annuities and life insurance grandfathered existing contracts, i.e. the TEFRA laws and MEC regulation.


Advisors and our national associations should prepare, with joint efforts, to take action to preserve the values and merits of the life insurance and the annuity industry to the benefit of our existing clients, future clients and to the well-being of the nation.
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