Which helps explain the widespread dissonance in response to President Obama's proposal, put forward as part of his budget plan this month, to cap retirement accounts at about $3.4 million in a move that would raise $9 billion for the government over the next decade.  

The cap would prohibit taxpayers from adding more tax-free money to their accounts once they've crossed that $3.4 million threshold, the amount needed to fund a $205,000 annual annuity for a 62-year-old. Account holders could add to money to their savings if their investments lag.

Investment Co. Institute CEO Paul Schott Stevens, whose Washington- based trade group lobbies on behalf of mutual funds, summed it up well when he said the proposed cap is "unworkable," adds confusion to the retirement system and would discourage savings.

However, proponents say, given our paltry savings record, the number of Americans likely to hit the president's proposed ceiling wouldn't be significant any time soon. In fact, it's really an insignificant number of savers who would be affected.

On this point, the administration is correct. A $3 million-plus cap would affect about 0.1 percent of people age 60 or older with at least one IRA or 401(k) account in 2010 and 2011, according to the Employee Benefit Research Institute, a Washington nonprofit research group.

But the impact could be significant in other ways. For years now, U.S. companies have been phasing out traditional pensions and replacing them with company-sponsored 401(k) plans.

The danger for most, especially those with account balances far, far below the proposed cap, is that the people who would be among the most affected by it—small-business owners—could shut off 401(k) plans for all employees.

"If this legislation were enacted tomorrow, we would probably deactivate our plan," Joe Nealon, a partner in Pacific Western Lumber, a Lakewood, Wash., lumber-trading company, told the Wall Street Journal.

Brian H. Graff, CEO of the American Society of Pension Professionals and Actuaries, is rightly upset by the president's proposal.

"If a small business owner has saved $3 million in his or her 401(k) account, they won't be allowed to save any more—and will have to pull out and pay tax on any balance over that amount," Graff said. "Without any further incentive to keep the plan, many small-business owners will now either shut down the plan or reduce contributions for workers. This means that small-business employees will now lose out not only on the opportunity to save at work, but also on contributions the owner would have made on the employee's behalf."

"Small-business owners have been playing by the rules all along," he said. "They saved each year within federally dictated contribution limits and they provided matching and other contributions to their employees to comply with federally mandated nondiscrimination rules. Now these small-business owners are being punished for doing right by their workers and saving and investing successfully."

In a world where many of us have failed to prepare adequately for retirement, taking any action that might discourage savings is simply counterintuitive.

The Obama cap needs to be reconsidered. Better yet, let's just leave people's retirement accounts alone.