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How Peter Thiel exploited a loophole to accumulate $5B in his Roth IRA

– ProPublica conducts ongoing investigations into how the richest people avoid paying taxes. And the latest story, it’s surprising that this one has to do with the tool. The idea behind the Roth is that low-income earners can save for retirement and withdraw tax-free in their golden years. in general Contributions are capped at $6,000 per year, and Roth accounts average around $40,000 at the end of 2018. Ah, but the wealthy have found a loophole. And no one has taken advantage of it quite as successfully as PayPal co-founder Peter Thiel. “Using a stock offer that is out of reach for most people, Thiel took a retirement account worth less than $2,000 in 1

999 and spun. It’s a $5 billion fortune,” per story, and the upside is that when Thiel is 59 and a half years old—he’s 53 now—he can start withdrawing money tax-free.

This explains the vulnerability with an example: Open an IRA for $1,000. You use that money to buy 1 million shares in a startup company for a fraction of a penny per share. in a few years The company will go public And each share is worth $50. Suddenly, that humble $1,000 account is worth $50 million, and since it’s all happening within a Roth IRA, it’s tax-free. It is contrary to Roth’s original intentions and is numbered. Thiel is far from the only 1% member to exploit the loophole—Warren Buffett aide Ted Weschler has $264 million in Roth and a fund manager. Hedge Randall Smith earned $252 million, but Thiel earned the title “Lord of the Roths” (read full story).

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