Baird’s Tim Steffen Offers Timely Perspective on Obama Budget Proposal

MILWAUKEE, April 11, 2013

While many elements of the budget President Obama proposed yesterday may seem familiar, his proposal does include some new items that could have future implications for investors, according to Tim Steffen, CPA/PFS, CFP®, Director of Financial Planning at Baird.

“Most of the ideas here are the same things we’ve seen in previous budget proposals from President Obama, but that ultimately were not addressed in the American Taxpayer Relief Act,” Steffen said. “However, there are some new items that really caught my attention as a financial planner.”

Steffen shares his observations below.

New items included in this budget proposal:
    • The biggest is the cap on retirement account balances, which based on current interest rates would be set at $3.4 million. The actual proposal wasn’t nearly as onerous as people originally feared – for example, you won’t be forced to take withdrawals from the account once it passes the threshold. The proposal would just prevent contributions to the plans once they exceed the limit. This is still a blow to those who want to save for retirement, but not nearly as big as we feared when this leaked out last week.

    • This proposal also contains a version of the “Buffett Rule,” similar to the one that was proposed in the Senate last year. This would phase-in a minimum 30% tax on any taxpayer with income over $1 million.

    • Also included in the budget proposal is another idea that was tried in 2012, but never made it out of Congress – requiring most non-spouse beneficiaries of retirement plans to liquidate the account within five years of the owner’s death. This would greatly limit the idea of “stretch IRAs.”
Recycled ideas from previous budget plans:
    • A 28% cap on the benefit of itemized deductions, retirement plan contributions, tax-exempt interest and other tax preferences.

    • Limiting the use of some advanced estate planning techniques.
    • Simplifying the RMD and rollover rules for retirement accounts.
    • Taxing carried interest as ordinary income rather than as a capital gain.
General observations:
    • The President also proposed bringing the estate tax exemption down from $5 million to $3.5 million, and raising the tax rate from 40% to 45%. The current levels were established as part of the January tax act, and therefore these items were considered a settled issue by many.
    • When you compare this budget proposal to what came out of both the House and Senate earlier this year, you can see the divergence of opinions among those in Washington as to how to handle our current budget deficits.

To schedule an interview with Tim Steffen on this or other wealth management topics, contact Amy Nutter, Baird Public Relations, at (414) 765-3988 or

About Tim Steffen
As Director of Financial Planning for Baird’s Private Wealth Management group, Tim Steffen is a noted expert on the financial and estate planning needs of high-net-worth individuals. Prior to joining Baird in 1999, he worked in Arthur Anderson’s Private Client Services group where he specialized in tax and financial planning. He earned his bachelor’s degree in Accounting from the University of Illinois. Steffen is a Certified Public Accountant/Personal Financial Specialist, a CERTIFIED FINANCIAL PLANNERTM professional, a Certified Private Wealth Advisor® professional and a member of the American and Wisconsin Institutes of CPAs, the Financial Planning Association and the Investment Management Consultants Association. For more tax and financial planning tips and insights, follow him on Twitter @steffen_rwbaird.

About Baird
Baird is an employee-owned, international wealth management, capital markets, private equity and asset management firm with offices in the United States, Europe and Asia. Established in 1919, Baird has more than 2,700 associates serving the needs of individual, corporate, institutional and municipal clients. Baird had more than $99 billion in client assets on Dec. 31, 2012. Committed to being a great place to work, Baird ranked No. 14 on FORTUNE’s 100 Best Companies to Work For in 2013 – its tenth consecutive year on the list. Baird’s principal operating subsidiaries are Robert W. Baird & Co. in the United States and Robert W. Baird Group Ltd. in Europe. Baird also has an operating subsidiary in Asia supporting Baird’s investment banking and private equity operations. For more information, please visit Baird’s Web site at

For additional information contact:
Amy Nutter
Baird Public Relations