Putting a cap on tax-deferred retirement savings, as President Obama has proposed in his budget, would discourage people from saving for retirement, some financial experts said today.

As anticipated, President Obama proposed putting a limit on tax-deferred retirement accounts such as IRAs and 401(k)s that would amount to about $3 million. But some financial experts criticize the plan, saying it would discourage saving and encourage the government to tax smaller accounts in the future.

“This is just the camel’s nose under the proverbial tent,” says Hugh Anderson managing director and partner of HighTower Las Vegas, a national advisory firm that serves wealthy individuals and institutions. “It’s only a matter of time before all retirement accounts are targeted.”

“This flies in the face of our goal of creating more flexibility, which encourages people to save,” he adds.

Anthony M. Franchimone, a financial consultant and principal with the Retirement Benefits Group in San Diego, attacked the idea that anyone should have the right to decide for someone else what is a reasonable retirement amount.

President Obama has said the limit will allow a reasonable return for retirement. He has said tax-deferred retirement accounts were never designed as a way for someone to amass a multi-million account, as did 2012 Republican presidential candidate Mitt Romney.

“Who is to say what a reasonable level of retirement savings is?” asked Franchimone.  “No one knows what someone else has to pay for and the cost of living is different in different parts of the country. We should be encouraging people to save as much as they can for as long as they can.”

The limit on savings will discourage employers from sponsoring retirement accounts with matching funds, says Mark D. Kemp, president of Kemp & Associates Retirement Services in Harleysville, Pa. A CEO who personally reaches the maximum may not want to bother with a program for employees if he can no longer take advantage of the program himself.

“Putting a limit on savings takes away the incentive for capitalism and the ultra wealthy will invest elsewhere,” Kemp says.

A young person who begins putting money in a retirement account at age 25 could easily reach the $3 million maximum by the time they are 65, adds Kemp. 

The president’s proposal would limit returns in retirement accounts to $205,000 per year, which right now translates into about a $3 million account. Depending on interest rates, the allowed account size could vary and be as low as $2.2 million, the  Employee Benefits Research Institute estimates.

A $3 million cap would affect 0.03 percent of the about 20.6 million IRA accounts that existed at the end of 2011, EBRI says. It would affect 0.06 percent of total account holders, since some holders have more than one account. The limit would hit 0.0041 percent of 401(k) accounts.

The Investment Company Institute also came out against the proposed limit.

“The proposal to place a dollar cap on individual retirement saving accounts would add complexity and confusion to our nation’s system for retirement savings,” says ICI president and CEO Paul Schott Stevens.

“This unworkable proposal to cap individuals’ savings in 401(k)s, other defined contribution plans, and individual retirement accounts would discourage employers from creating retirement plans and workers from contributing,” he adds. “We urge policymakers to fix our budget and debt problems without weakening savings and retirement security.”