GAO Examines Seven-Figure IRAs

Thousands of taxpayers have socked away more than $1 million in individual retirement accounts, the Government Accountability Office said Tuesday.

{mosads}GAO, in a study prepared for a Senate Finance Committee hearing, said 9,000 taxpayers have more than $5 million in their IRA. About 99 percent of taxpayers with an IRA have less than $1 million in that account.

Taxpayers can take deductions for contributions to their IRAs, but some Democrats have questioned whether the current set-up gives too much of a break to wealthy individuals.

“It would take several lifetimes of work for the typical middle-class American to save that much money,” Finance Chairman Ron Wyden (D-Ore.) said about the $5 million IRAs.

Wyden said that most of those IRAs are “sweetheart stock deals” that allow wealthy investors to use their retirement accounts as a tax shelter.

“Wise investors have every right to use all the tools available to them, and no one should begrudge them their success,” Wyden added.

“But IRAs were never intended to become tax shelters for millionaires – they’re designed to help typical Americans save for retirement.”

For its part, GAO would only say that “it would take an aggressive stock market investment strategy to accumulate an IRA balance over $5 million. The watchdog added that there’s no legal limit on how much a taxpayer can put in an IRA, or how much they can roll over from employer-defined contribution plans.

Still, the average taxpayer who made the maximum IRA contributions since 1975 would only have north of $300,000 in their account given an average return on investments, GAO said.

Democrats have sought new limits on the tax benefits the wealthy get from retirement accounts.

Sen. Orrin Hatch (Utah), the top Republican on the Finance Committee, warned Democrats away from politicizing the issue, saying both parties had worked together for a quarter century to encourage saving among America’s workers.

“What I hope to not hear today are poll-tested slogans like ‘Upside Down Tax Incentives,’ ‘Bang for the Buck,’ ‘Pension Stripping,’ or ‘The System is Rigged’ without substantiating data,” said Hatch. “We need to hear facts and serious policy proposals, not political slogans.”