Peter Thiel Turned a $6,000-a-Year Retirement Account Into a $5 Billion Tax Shelter (propublica.org) 315
Remember when ProPublica said they'd obtained the tax returns of some of America's richest people?
Now they're reporting that Peter Thiel turned a small retirement account — the kind meant to help middle class investors — "into a $5 billion tax-free piggy bank." Billionaire Peter Thiel, a founder of PayPal, has publicly condemned "confiscatory taxes." He's been a major funder of one of the most prominent anti-tax political action committees in the country. And he's bankrolled a group that promotes building floating nations that would impose no compulsory income taxes. But Thiel doesn't need a man-made island to avoid paying taxes. He has something just as effective: a Roth individual retirement account.
Over the last 20 years, Thiel has quietly turned his Roth IRA — a humdrum retirement vehicle intended to spur Americans to save for their golden years — into a gargantuan tax-exempt piggy bank, confidential Internal Revenue Service data shows. Using stock deals unavailable to most people, Thiel has taken a retirement account worth less than $2,000 in 1999 and spun it into a $5 billion windfall. To put that into perspective, here's how much the average Roth was worth at the end of 2018: $39,108... What's more, as long as Thiel waits to withdraw his money until April 2027, when he is six months shy of his 60th birthday, he will never have to pay a penny of tax on those billions....
While most Americans are dutifully paying taxes — chipping in their part to fund the military, highways and safety-net programs — the country's richest citizens are finding ways to sidestep the tax system. One of the most surprising of these techniques involves the Roth IRA, which limits most people to contributing just $6,000 each year... Yet, from the start, a small number of entrepreneurs, like Thiel, made an end run around the rules: Open a Roth with $2,000 or less. Get a sweetheart deal to buy a stake in a startup that has a good chance of one day exploding in value. Pay just fractions of a penny per share, a price low enough to buy huge numbers of shares. Watch as all the gains on that stock — no matter how giant — are shielded from taxes forever, as long as the IRA remains untouched until age 59 and a half. Then use the proceeds, still inside the Roth, to make other investments.
ProPublica argues Thiel's move alone "deprived the U.S. government of untold millions in tax revenue. Perhaps billions." But he's not the only multi-millionaire they found stashing vast sums into untaxed accounts:
Now they're reporting that Peter Thiel turned a small retirement account — the kind meant to help middle class investors — "into a $5 billion tax-free piggy bank." Billionaire Peter Thiel, a founder of PayPal, has publicly condemned "confiscatory taxes." He's been a major funder of one of the most prominent anti-tax political action committees in the country. And he's bankrolled a group that promotes building floating nations that would impose no compulsory income taxes. But Thiel doesn't need a man-made island to avoid paying taxes. He has something just as effective: a Roth individual retirement account.
Over the last 20 years, Thiel has quietly turned his Roth IRA — a humdrum retirement vehicle intended to spur Americans to save for their golden years — into a gargantuan tax-exempt piggy bank, confidential Internal Revenue Service data shows. Using stock deals unavailable to most people, Thiel has taken a retirement account worth less than $2,000 in 1999 and spun it into a $5 billion windfall. To put that into perspective, here's how much the average Roth was worth at the end of 2018: $39,108... What's more, as long as Thiel waits to withdraw his money until April 2027, when he is six months shy of his 60th birthday, he will never have to pay a penny of tax on those billions....
While most Americans are dutifully paying taxes — chipping in their part to fund the military, highways and safety-net programs — the country's richest citizens are finding ways to sidestep the tax system. One of the most surprising of these techniques involves the Roth IRA, which limits most people to contributing just $6,000 each year... Yet, from the start, a small number of entrepreneurs, like Thiel, made an end run around the rules: Open a Roth with $2,000 or less. Get a sweetheart deal to buy a stake in a startup that has a good chance of one day exploding in value. Pay just fractions of a penny per share, a price low enough to buy huge numbers of shares. Watch as all the gains on that stock — no matter how giant — are shielded from taxes forever, as long as the IRA remains untouched until age 59 and a half. Then use the proceeds, still inside the Roth, to make other investments.
ProPublica argues Thiel's move alone "deprived the U.S. government of untold millions in tax revenue. Perhaps billions." But he's not the only multi-millionaire they found stashing vast sums into untaxed accounts:
- Ted Weschler, a deputy of Warren Buffett at Berkshire Hathaway had $264.4 million at the end of 2018.
- Hedge fund manager Randall Smith, whose Alden Global Capital has gutted newspapers around the country, had $252.6 million in his.
- Warren Buffett, one of the richest men in the world and a vocal supporter of higher taxes on the rich: $20.2 million
- Former Renaissance Technologies hedge fund manager Robert Mercer: $31.5 million
U-Haul behind a hearse. (Score:2)
Jokes on all of them. You can't take it with you.
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Thanks to low inheritance taxes, your family can take it with them.
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You enjoyed the French Revolution, huh? Kill all the Royals and wealthy and confiscate their holdings. And when that wasn't enough they started killing each other. Citizen Robespierre was a real tool and it turned on him. The French revolution was a bloodbath and turned on its creators. The American Revolution was neither.
Just remember no one ever got a job from a poor man. Wealthy people hire the rest of us to create more wealth for us and for them and why not? It's a good thing. Capitalism has cre
Re:Not if you eradicate them all first. (Score:4, Insightful)
In other words, trickle-down economics.
It doesn't work when you have such extreme wealth inequality as the USA has now.
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Bullshit. Every other block in the city is filled with places looking to sell shit on credit. It's how I got my first work truck at 18. At worst it's a couple years difference between buying a house or starting a business versus having someone else cosign your loans early. Literally everyone can get a credit card and just pay the balance on items you'd buy anyway.
Work history is the single biggest thing most lenders look for.
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Umm either you don't know any really rich people, or you don't know any poor people. Many poor people have no chance to ever buy a house, because its impossible to save enough for a down payment. And I'm not talking about credit cards when I say credit. The credit terms on a card are vastly different between the credit rich are able to get. Tell me, can you walk into a bank and get $10M in credit easily? $100M? Seriously, when you have sufficient wealth, you operate on a whole different playing field than t
Re:Not if you eradicate them all first. (Score:5, Interesting)
You enjoyed the French Revolution, huh? Kill all the Royals and wealthy and confiscate their holdings. And when that wasn't enough they started killing each other. Citizen Robespierre was a real tool and it turned on him. The French revolution was a bloodbath and turned on its creators. The American Revolution was neither.
.
While I think your sentiment is reasonable here, there is a much easier explanation as to why the "American Revolution" did not have these circumstances: It was only a change of regime, but not a 'revolution' in the sense of breaking up social classes and redistributing wealth and power. At the end of the American Revolution, most of the same aristocrats and elites who were powerful in the colonies continued to be powerful in the new republic. It is for this reason that many scholars of revolutions disagree that the american revolution was indeed a 'revolution' in the academic sense, and this and other reasons the British still refer to it as the "American War of Independence.'
Re:Not if you eradicate them all first. (Score:5, Insightful)
Actually, the French revolution explained clearly to the wealthy, that they should avoid being in the face of politics, if they can. Financing wars and future leaders is fine, don't associate publicly with them. Lot's of very wealthy people survived because they understood the rules.
The above can be validated by looking at the ownership records of the chateau's in France. Some of the wealthiest people still had there homes till WW2.
Also it helps to have another 1 or 2 properties to go to.
Re: Not if you eradicate them all first. (Score:4, Funny)
"Just remember no one ever got a job from a poor man."
the Pope might disagree.
Definition of capitalism (Score:2, Insightful)
Definition of capitalism: The art of making money with the work of others.
If there ever was a perfect example of that, this is it.
Parasitism. Pure and simple. Wants everything, doesn't want to work for any of it, or pay taxes for any of it.
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Interesting, but I theoretically disagree by way of a joke. Apologies in advance to David Ricardo.
Being a parasite is just another comparative advantage. By focusing on his extraordinary talent of "making money" from nothing, society as a whole winds up richer, though society as a whole has to wait for Thiel's death to benefit. And no fair complaining that the value of his securities is just a matter of quasi-public speculative opinion and affected by various con-artist tricks and distortions.
Enough with th
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If you buy a house, own it for 10 years, then sell it for 3 times what you paid for it, whose work did you make money from?
Nobody's. Somebody else (the buyer) put a higher price tag on it. It's still the same house, same location, probably even with a bit more wear and tear than it had 10 years prior.
Stocks work basically the same way. Look at Tesla, they're no more profitable now than they were two years ago. Yet if you owned tesla shares, other investors just arbitrarily put a higher price tag on what you
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Don't work for money, make money work for you.
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Actually it sounds like the definition of government being manipulated by Republicans, in this case Sen. Richard Roth, in 1997 (Taxpayer Relief Act) to come up with that tasty little tax dodge.
Re: Definition of capitalism (Score:5, Insightful)
No - not at all. The hint is in the name. Capitalism letâ(TM)s you get paid for having capital. Itâ(TM)s about owning things, not about working.
Re: Definition of capitalism (Score:5, Insightful)
Capital is not just "things". It is tools, factories, and productive capacity.
Capitalism is using the ownership of the means of production to generate wealth.
If someone invests to build a factory, it is fair and reasonable for them to receive a share of the profits from that factory. It is unfair and unreasonable to deprive them of their share of the profits. It is also stupid, since it removes the incentive to invest and innovate, and that is why alternatives to capitalism lead to poverty and oppression.
If you don't like capitalism, you are free to opt-out. Go start an anarcho-syndicalist commune [youtube.com]. Nobody's stopping you. Good luck.
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right, but the point is having the things. if you're actually doing anything, you're already a house [token] at best. this offends some people, probably the ones doing the work.
Re: Definition of capitalism (Score:3)
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US is currently trending a bit too much toward the latter,
Corporate tax rates were reduced, so that doesn't seem to be the case.
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If you don't want to work for a business, then don't, start your own business, nothing is stopping you.
Most small businesses fail, because capitalism is rigged to give existing players an extremely disproportionate advantage over new entries. It would be like if we eliminated all weight/skill classes in sports, and simply let the biggest athletes beat the ever-loving snot out of anyone foolish enough to challenge them.
Every other system in the world is worse.
You don't necessarily have to throw the baby out with the bathwater to patch some of the more egregious flaws in capitalism. Plenty of civilized countries offer better social safety nets and
Re: Co-ordination of work is a service (Score:5, Insightful)
Is organising people 50,000 times harder than software engineering? Does Elon musk *really* do in hour, what a well paid middle class American does in 7 years of work?
No one is arguing that people at the top shouldnâ(TM)t be paid well. Theyâ(TM)re arguing that their gains are disproportionately huge compared to the people doing the actual work.
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Is organising people 50,000 times harder than software engineering? Does Elon musk *really* do in hour, what a well paid middle class American does in 7 years of work?
Of course he does. If you gave the average american 7 years how far along with creating SpaceX do you think they'd be? Or Tesla? If you gave them literally their entire life they'd never accomplish even 1% of starting and running a company like that. Even other billionaires couldn't do what Elon Musk did with those companies, so don't give me the shit about "blah blah South African blood diamonds." You seriously underestimate how stupid the average person is.
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Look, as is well known here, I'm an Elon Musk fan. And he's famously a workaholic. But the GP's point was not about whether Musk's actions created a lot of wealth and whether the average person would have been able to do the same, but rather, whether the amount of work he put in linearly corresponds with his wealth. And it doesn't. He does put in crazy hours, but not many orders of magnitude more than your average worker.
Now, don't get me wrong, there's a lot of hare-brained taxation ideas going around
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Is organising people 50,000 times harder than software engineering?
It's definitely harder. In fact, there are very few people who can do it very well. Because the supply of such a person is quite low relative to the demand, they can ask for, and receive, more money. And you know what? They usually end up earning the company much more than they're paid.
Case in point, a CEO whose pay that commies like to point at as being excessive, is John Legere. He turned t-mobile from a distant 4th wireless carrier to being the fastest growing within 4 years. He made the company, and its
Re: Co-ordination of work is a service (Score:5, Interesting)
There was a study done which showed that lower-paid CEOs actually performed better.
No one is arguing that CEOs should not make more money: the issue is how much more.
It's important to look not only at the successful CEOs, but also the unsuccessful CEOs who left with huge pay-offs. If society decides to pay for success, the reverse should be true, right?
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Keep worshiping the ultra wealthy if you want.
LOL I love how explaining economics to the plebs is "worshipping the ultra wealthy". Truthfully I haven't commented one way or another what my feelings are on it. The closest I've come to that is explaining that, as history has shown repeatedly, the alternative economic systems really don't work, and in fact destroy value.
They don't care about you. They won't help you. They will push you down, just to increase the value of their portfolio. None of this behavior adds to the wealth of society. Many of the ultra wealthy are focused on increasing the proportion of the pie they own, without regard to the fact that their policies reduce the size of the pie.
I don't see any evidence that they reduce the size of the proverbial pie; I've only seen evidence of the opposite. Maybe some of them do, and I'm sure you can even find "a lot" of them tha
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While I don't absolutely disagree with what you're saying, you should look back at the California college admissions scandal and some of the nonsense that came out surrounding it. There are C-class executives in the United States whose entire lives have been curated by professional resume padders. Those people will never really accomplish anything with their lives, yet they can hold CEO positions in well-established companies that have long since been sold off by their hard-scrabble founders.
My takeaway f
Re:Definition of capitalism (Score:5, Informative)
This. I don't see the purpose in naming and shaming somebody for doing exactly what you're supposed to be doing with a Roth IRA. Literally, exactly what it's designed for.
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Agreed. There are plenty of good reasons to hate Peter Thiel. But this isn't one of them.
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From TFS:
Open a Roth with $2,000 or less. Get a sweetheart deal to buy a stake in a startup that has a good chance of one day exploding in value.
That doesn't sound like "transfer in stock from their own private companies that they assigned a fictitiously low value". In fact, it sounds like exactly what a Roth IRA is intended for. What you're describing sounds like insider trading, which given the verbiage (to wit: "good chance") does not sound like insider trading.
The initial investment was founder shares in paypal just before they started bringing in big investors (at a MUCH higher valuation).
So yes, he (and his co-founders) transferred in stock from their own private company that they assigned a fictitiously low value.
Later on, as an Angel investor, he would have had the opportunity to get some very cheap stocks in startups that wanted him to invest. Since his investment comes with valuable resources (connections, advice, other angel opportunities), he again was ge
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It does go to show what kind of deals these big ticket investors have access to, if they can turn an investment
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no, no, no you just need to work really hard rofl now shut up and get to work pleb.
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That's fair enough. If you do really well on your investments, you get to keep all of that without paying tax, just like him.
Except you can never do that. This is how it works: you invest in a company just after funding, when it's worth $10 (or whatever, it's up to you). So if you buy $1 share in it, you get a cool 10% of the company. Then you go to your VC buddies and tell them that you've invested in that nice startup and they chip in for the seed round. And you do the same when they come to you.
And that's it. With Roth and QSBS (Qualified Small Business Stocks) you can eliminate almost all of the tax (or ALL of it if you wai
Re:Definition of capitalism (Score:5, Insightful)
No. Read the article. He invested essentiall $1,700 of "founders shares" in PayPal that he was allowed to purchase at $0.001 each. When PayPal went "boom", so did his investment -- tax free. While he may have rolled over further funds and paid the one-time rolllover tax later, this is a scam. The Roth was never intended for the wealthy to play games with, and "founders shares" that are issued at pittance value before a company goes public, are a lever to the scam.
Roth IRA were designed for middle-income Americans, not billionaires to game the system. There's a reason the income caps are there for investing.
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He invested essentiall $1,700 of "founders shares" in PayPal that he was allowed to purchase at $0.001 each.
It was not a one-off event. He's been doing it for a while. Mind you, this is a common strategy in the VC world anyway.
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Mostly because shit like this [forbes.com] has been ever popular with Republicans and the part of the Democrat Party that caters to the rich.
ProPublic covers this angle [propublica.org] in great detail. This garbage started in ernest in 1997 and continues unabated to this day. As the IRS was key to a portion of the Affordable Care Act, aka "Obama Care", the Republicans targeted it as a way to cripple that law.
Fixing the funding issues [politico.com] are the IRS are a major focus of President Biden.
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IRA contributions are limited to around $20k/year (ballpark).
Contributions are limited.
Rollovers are not.
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Not, you are not in the ballpark. It's $6k or $7k if you are over 50 years old.
Lemme get this straight... (Score:5, Insightful)
So federal legislation purportedly to help the middle class was covertly used by the rich to get richer?
Say it ain't so, Joe [wikipedia.org]. Say it ain't so. [wikipedia.org]
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You seem like the least intelligent thing to ever inhabit this universe.
Re: Lemme get this straight... (Score:5, Insightful)
So the tax free IRA only for bad investors? (Score:5, Insightful)
Is that the concept here?
As in, your gains will be tax-free.... except we didn't really mean that.. oops.
Terms are terms. Get the law changed for future IRAs if you don't like their rules, but it would be theft to confiscate wealth accumulated in full accordance with the laws and regulations.
Thiel's a bit of a dick, but he's a successful investor, helping drive the innovation economy, within the rules set down.
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It's possible he got a 5 billion on a 100K investment spread out over the last 20 years. It's far more likely there is or was some IRS kosher way to pay for most of the value of the share in some other way, but put the full share in the retirement account.
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Yes... something is very fish, because the simple fact is you can't turn $6000 into $5 Billion let alone $2000, Not even
20x that over 20 years ---- Somehow he contributed in a Ton more to the IRA that was not appropriately required to be considered a contribution.
JMHO... His IRA getting access to deals not available to others, or the IRA Beneficiary getting to Pay an uncommon amount to their custodian Or to make and direct business deals on their own to participate in startup funding should b
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because the simple fact is you can't turn $6000 into $5 Billion let alone $2000,
Sure you can.
Step 1: Start a startup.
Step 2: Issue yourself stock at a fraction of a penny in early days of startup.
Step 3: Put $6K per year of said stock in your Roth IRA account (yes, you can actually do this)
Step 4: Go public, watch stock value soar.
That's pretty much how he did it. Perfectly legal, if incredibly abusive of the system.
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There isn't a flaw. The money you put into the IRA has already been taxed. All the gains that happen within the account don't get taxes until you start taking money out or not at all if you wait until 59 and half years of age.
Still, how exactly someone was able to contribute 6k over 20 years and turn it into 5 billion definitely seems out of whack.
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I don't think anyone is saying that he should pay taxes on those. As you pointed out, the game was fair. And changing the taxation on that account now would be wrong.
But it does point out that the rules could be amended so that the letter of the law aligns better with the spirit of the law. The spirit of the law was to make an account for middle class to help with their retirement. You could change the rule of the Roth IRA 2.0 to state that the first 5 million of lifetime-gains withdrawn are tax free; but a
Re:So the tax free IRA only for bad investors? (Score:5, Interesting)
But it does point out that the rules could be amended so that the letter of the law aligns better with the spirit of the law.
Or just enforce the existing rules more thoroughly. Get a sweetheart deal to buy a stake in a startup that has a good chance of one day exploding in value.
There is a whole class of transactions [irs.gov] that are supposed to be prohibited in an IRA, including:
Selling property to it
The IRS probably just need to expand that definition of Selling property to include Non-publicly traded shares of a Business with which the IRA Owner holds a significant interest or investment or support in through any means direct or indirect, outside the IRA. Better to fix whatever is allowing them to put inorganic infusions into their IRA.. Just setting a limit on it would still allow the wealthy to shelter more $$$ than they need to from tax.
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Re: So the tax free IRA only for bad investors? (Score:5, Insightful)
It's reasonable to restrict IRA contributions to only those securities that anyone can invest in. If some pre-IPO startup is looking for seed money and is only accepting "qualified" investors, then that investment shouldn't be available for IRA tax reductions.
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And in the context of his $5B Roth IRA, an abuser of the system. Irrespective of what Congress intended, it's just plain true that neither you, nor I, nor anyone else reading this can purely self-manage their Roth IRA like Thiel did. We'd lack the commercial option for self-management in the first place, then we'd lack the risk tolerance to potentially hand the IRA a huge amount of money in taxes, interest, and penalties for self-dealing in our Roth
No, the cat does not "got my tongue." (Score:2, Troll)
1. Government will get taxes on its withdrawl eventually. If there's some loophole where he can withdraw at 59 1/2 without paying taxes or penalties, talk to your senators and congressmen.
2. The large growth is the retirement fund plan working as designed. Government wants to help people build retirement funds to take the pressure off social security. So they delay collecting taxes until you take it out to live off of. This helps you build it faster, and government delays collecting money, instead colle
They had better not get taxes on withdrawal (Score:2, Informative)
Government will get taxes on its withdrawl eventually.
The point of a Roth is that the government cannot, in fact, get taxes on the withdrawal of funds from this account once you reach retirement age.
This is why EVERYONE should put as many retirement funds into a Roth if they can.
The summary makes $6k a year sound puny but if you start doing that in your twenties, over the course of several decades that account can easily add up to a million even for the most middle class investor.
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Fuck your millions. If asshole can get BILLIONS on 6k why should I have to only get a lousy million or two. See the problem?
But yes, otherwise absolutely you are correct and we should all be invested towards our retirement at as young an age as possible.
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Generally I would agree, but it seems like he did some shady shit when he formed his company. Good post at the bottom of this page covers it. Something like being able to issue shares to company people at .001 a share or something shit. Stuff that only a fraction of a fraction of the population will ever get the opportunity to even attempt to capitalize on.
I guess that's fair in the sense that anyone can start a company and he didn't break any laws. As someone else mentions, seems like it goes against the s
It's not complicated at all (Score:2)
Roth's value is only obvious if you are going to max out the contribution
Let's say you could only contribute $100 per month into a Roth.
If you start doing that at $20, how much will you have at 60 if you get a 10% return annually (pretty easy by investing over that time entirely in an S&P 500 index fund).
At 60 years old, that is $536k. If you can hang out and work until 65, that is $870k.
If you had instead put that in a traditional IRA, you would have to pay tax on that $536k (probably around 30-40%),
Re: It's not complicated at all (Score:2)
You're missing the fact that if you can only afford $100, then that is $100 invested into a traditional IRA, but only $100-taxes for Roth. If during retirement you only pull out as much as you make each year while working, you pay effectively the same taxes from your IRA as you did working. But with a traditional IRA, you invested more, so it has grown more, due to the magic of compound interest.
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1. Government will get taxes on its withdrawl eventually. If there's some loophole where he can withdraw at 59 1/2 without paying taxes or penalties, talk to your senators and congressmen.
Actually there are plenty of ways to distribute from a Roth IRA before 59.5 without paying penalty or taxes. I'll let you talk to you tax accountant about that!
Re: No, the cat does not "got my tongue." (Score:2)
Yep, it's complete blindness. We know how it ends with individuals given unlimited money. We know that a department in a company given an infinite budget would find he's ways to spend it, becoming a sprawling mess. Yet somehow people think government will be different?
They'll puss it away and still be re-elected. At least st the federal level, re-election rates are typically at around 90%, with voters reasoning that their guy is the one competent guy.
A jealousy driven hit piece (Score:2, Insightful)
Re:A jealousy driven hit piece (Score:5, Insightful)
If you start a company you take a huge risk. Thiel took those risks and some of them paid off. The radical leftists of Pro Publica are just mad that he did better than them. Lest we forget, Thiel made his own way, and now they want to tear him down for doing better given the same rules as everybody else.
I like how you didn't dance around your stance like so many poster defending Thiel above did. However, it should be noted that they danced around making this same point because they're smart enough to realize that this type of honesty reveals the weakness (and selfishness) of the belief.
No one wants to "tear him down" by making him pay a substantial amount of taxes. You could tax Thiel at 70% of all income (including capital gains) and he would still have enough wealth to live the same opulent lifestyle he lives today. What do you think happens when, generation after generation, people are able to hoard an abundance of wealth and pass it on to their children? It doesn't matter if it was earned by rolling up his sleeves and applying an extraordinary amount of elbow grease—the result will be the same. Are you just pining for some modern form of feudalism? Because if we continue to let this happen that's what will happen. Allowing a small sub-sect of the population to hoard the vast majority of society's wealth is incompatible with democracy and social mobility.
Throughout history, you can find countless examples of societies where wealth was hoarded by a minority of the population. Perhaps you can find some good counter examples, but as far as I know the result has always been the same: they pass it on to their children and the ability to achieve social mobility diminishes with each subsequent generation until disaster (plague, revolution, etc.) forces the aristocratic/feudal class to relinquish enough so that social mobility can return. Thiel may be an example of social mobility within his generation, but it should also be noted that the progressive taxes that prevented the previously described situation from occurring were also largely eliminated during Thiel's lifetime. Without a form of distributive justice that prevents a minority of the population to hoard the majority of wealth, there will be no Peter Thiels in the future because the upper class will create insurmountable barriers social mobility.
I suppose my opposition to an aristocratic state that is incompatible with democracy or social mobility makes me a "radical leftist."
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Because if we continue to let this happen that's what will happen.
I've been reading this for at least 20 years. When will it happen?
Re: A jealousy driven hit piece (Score:3, Insightful)
Oftentimes, wealth is split up or dissipates over time due to mismanagement. Almost. One of the top 50 wealthiest people are inherited money. It just does not work that way.
What is happening is that it is easier to accumulate wealth in vast sums than it used to be, and hold it easier for longer. Ironically, it is regulation and government intervention driving that problem. Re
Re: A jealousy driven hit piece (Score:3)
That's not why people are mad. People are mad because the best investments are only available to accredited investors who are fantastically wealthy. If you're taking advantage of opportunities that lock out most of the country, then you shouldn't be getting a tax break.
The guy is a douchebag (Score:2, Funny)
Preparing the narrative for taxing the Roth (Score:5, Insightful)
I am no Peter Thiel in terms of bank balance.
Even since I was young and fairly poor to start out with, I have put investment money into a Roth, because the tax benefits when you retired were so clear - when you retired, if you made great investments you would have a nice sum of money that you could truly use as-is, since it would not be taxed if you withdrew from the account after reaching retirement age.
It was always an account meant for everyone, poor to rich, to try and keepsake retirement money sheltered from the unknown future of taxes, and therefore more reliable a base for knowing if you could retire.
It's pretty clear what this attack on Thiel is - an attempt to pave the way for efforts to tax Roth accounts, which for everyone until now were untaxible.
Honestly you could see this coming. With a government that grows at a rapacious rate every year, no matter what party is in control, the government was going to eventually going to try and come for that money. Put money into the Roth anyway even with that possibility in the back of my head...
The question is do we as a nation care enough for the middle class at this point to try and save the Roth? Or are we going to tear that shelter down and truly make sure there are only the extremely rich and the very poor?
If you are against wealth inequality, it would be best to stop efforts to ensure all the people in the middle are driven to be lower class also...
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Seeing as how the account is doing exactly what it is supposed to do, it must be something like this. Unfortunately I expect many people to take the bate.
Re: Preparing the narrative for taxing the Roth (Score:3)
Investments only available to accredited investors should not receive tax breaks. This has nothing to do with undermining the Roth IRA. This is about fair taxation.
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No. It _should_ be about fair taxation, but I promise you, it is not. If any action is taken at all, it will affect your Roth just the same. And that's what you're being set up for.
Re: What? No. (Score:2)
Accredited investors are supposed to know what they're doing. They don't need the government to subsidize their retirement investments. If you are taking advantage of investment opportunities that are predicated on you being rich, then there's no reason to subsidize your retirement; you're already rich.
Re:Preparing the narrative for taxing the Roth (Score:5, Insightful)
It's pretty clear what this attack on Thiel is - an attempt to pave the way for efforts to tax Roth accounts, which for everyone until now were untaxible.
I don't think that is what's going on at all. To me, it looks like some journalists are looking into ways billionaires exploit systems designed to support the middle class to create tax havens that further shift the tax burden onto the middle class (because in America, the ultra-rich and the ultra-poor don't pay taxes, so the middle class has to pay for everything).
Re:Preparing the narrative for taxing the Roth (Score:4, Informative)
It was always an account meant for everyone, poor to rich, to try and keepsake retirement money sheltered from the unknown future of taxes, and therefore more reliable a base for knowing if you could retire.
Actually no, it's not. That's why there are income limits when it comes to how much (if anything at all) you are allowed to contribute to a Roth. They specifically wanted it to NOT be for the rich. The problem is when you are rich, it's easy to manipulate your taxable income to make you appear to not be rich when it comes to things like this.
Re: Preparing the narrative for taxing the Roth (Score:3)
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What does taxable income have to do with a ROTH? The contribution limit is the same $6000 per year if you make $1 per year or $1M per year.
Ah no, it's not. If you make $1, you can contribute $1. If you make between $6,000 and $124,999, you can contribute $6,000. If you make $1M, you can contribute $0. For an individual, the AGI cutoff for a Roth IRA for 2021 is $140,000. Between $125,000 and $140,000 your contribution is scaled down from the $6K max. See: https://www.investopedia.com/a... [investopedia.com] or go look it on on the IRS website if you don't trust the link.
Now there is a non-defered IRA to Roth rollover trick which basically defeats that, but th
Re:Preparing the narrative for taxing the Roth (Score:5, Informative)
Thiel sold himself heavily discounted stock in his startup, just before it started exploding in value, and that's how his "investment" took off.
Or to put it another way.
Say you want to sell your house and someone offers your $500k.
So what do you do? Put $2k into a Roth, not now sell the house to yourself using that $2k in the Roth (maybe shove it through some numbered company). Now your Roth owns a house worth only $2k.... but your Roth just found a buyer for that house at $500k! Horay!! You now have $498k in your Roth that you'll never have to pay taxes on!! A 24,900% return!! Great investing!!!
That's more or less what Thiel did, he knew the stock was worth way more than $2k, but he made it $2k so it could sneak it into the Roth and then let it explode in value.
Of course, if you tried that with a house you'd probably get thrown in jail. Which is why most people feel that the rich play a rigged form of the game.
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If you can't afford the property taxes...you probably need to try harder. Besides, if the property your parents or grandparents owns is so valuable that a normal middle class job holder couldn't afford to pay the property taxes, then selling it would also be a huge boon. You could probably take the millions and outright buy something much more reasonable that would have pretty generous property taxes.
Property taxes just aren't THAT much for most normal single family properties. If that's all you had to pay
In other words IRAs exist and work as intended (Score:2, Insightful)
The Propublica author seems to have just now discovered Roth IRAs and is shocked, shocked! that they exist. But they've existed for decades and the rules regarding them have been roughly the same all during this time. Annual contributions to the IRA are capped but the gains on assets already in the IRA are not. And contrary to the author's assertion that the gains are 'are shielded from taxes forever', they are in fact only tax *deferred*. The IRS will get its cut when Thiel starts withdrawing money from th
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I think you're confusing Traditional IRAs, which are funded through pre-tax contributions and are taxed upon withdrawal (thus "tax-deferred") and Roth IRAs, which are funding through after-tax contributions and are not taxed upon withdrawal (thus "tax-free"). The traditional wisdom is that if you think you'll be in a higher tax when you're working than when you retire, it's better to use a Traditional IRA, and if the reverse is true, use a Roth IRA.
Some people will be better off with the first kind, and s
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Ah yes you are correct. It's been a long time since I've had a Roth IRA so I had forgotten the distinctions between the two types. :-|
Yes Roth IRAs can be a much better tax shield in the right circumstances. The fact that they can be inherited and the withdrawals staying tax-free for the beneficiaries is almost too good to be true. I will have to look into the details further. So it looks like it may be time for me to re-evaluate how my investments are structured....
Does $0.001 sound right for a share of PayPal? (Score:5, Informative)
Thiel wasn't a savvy investor.
He purchased shares of his own company that were deliberately undervalued in order to put millions of shares into the Roth IRA account.
This might be bad situation if the IRS was being deprived of the resources needed to enforce this law [propublica.org] such that it was increasingly focusing on poorer families with tax returns that are easier to audit [propublica.org].
What happened a year later?
He manipulated the price of his own company's stock to pay himself extremely well while pretending the stock was worthless for tax purposes.
Re:Does $0.001 sound right for a share of PayPal? (Score:5, Informative)
Thanks for making the effort to actually read the article and convey what it actually reveals. So many here are ready to fantasize why this is all just totally above board and anyone who thinks differently is just a bitter loser.
It is a flagrant abuse of the intent of laws around investing when someone self-deals -- represents both sides of the transaction as if he were two independent parties each seeking to to get the best deal they can for themselves. This is what Enron did on a massive scale in a slightly different way, setting up fake "independent" companies they controlled in which they hid their debts, keeping the assets (the money borrowed to create those debts) on the Enron books.
Thiel was "buying" stock from himself at an impossible price (for a legitimate transaction) because he was "selling" it to himself a pennies on the kilobuck. Romney did the same thing to create his $100 million 401K.
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The fact that you can do shit like this in this country an not go to prison still amazes me!
Isn't it the textbook definition of tax fraud and market manipulation?
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Thank you for your post. Probably the most informative post on this thread.
$0.001 may well be right (Score:3, Insightful)
While SEC filings describing that time don’t mention Thiel’s Roth, they show that he bought his first slice of the company in January 1999. Thiel paid $0.001 per share — yes, just a tenth of a penny — for 1.7 million shares. At that price, he was able to buy a large stake for just $1,700.
He purchased shares of his own company that were deliberately undervalued in order to put millions of shares into the Roth IRA account.
Were the shares undervalued? The first version of Paypal didn't launch until October 1999, when the company had six employees and two computers. In 2000, its first full year of operation, Paypal's losses were 10x revenues. So in January 1999, how much would a company like that really be valued?
TFA mentioned that Thiel was audited, and didn't end up paying a penalty or additional tax. So maybe the valuation at $0.001/share passed muster, or maybe they just didn't look at that.
Regardless, if you feel $0.001/s
Re:$0.001 may well be right (Score:4, Informative)
While SEC filings describing that time don’t mention Thiel’s Roth, they show that he bought his first slice of the company in January 1999. Thiel paid $0.001 per share — yes, just a tenth of a penny — for 1.7 million shares. At that price, he was able to buy a large stake for just $1,700.
He purchased shares of his own company that were deliberately undervalued in order to put millions of shares into the Roth IRA account.
Were the shares undervalued?
Yes, yes they were:
At the time Thiel bought his founders’ shares, his own hedge fund had already loaned the new startup $100,000, California and SEC records show.
And soon after the company sold him the shares, millions of dollars poured in from investors, securities filings show. In just a month’s time, the company sold a slice of itself to investors for $500,000. That June and August, another $4.5 million poured in from the venture fund arm of telecom giant Nokia and other investors, those records show.
No one thought the shares were worth $0.001/share. Instead, the founders were gifted shares as part of their compensation, but rather than taking them as straight compensation they gave them an artificially cheap value so that they could stuff the shares into their Roths.
Regardless, if you feel $0.001/share is artificially low as a stock price, I'm pleased to announced that I'm selling stock in my startup for $1/share, I have several million shares available for sale. So far our startup has 6 guys and two computers. We intend to start losing money voraciously in the next 12 months.
So, is your claim that Paypal would have been willing to sell shares at $0.001/share to investors? Because if they were I have a rather lovely bridge in my possession and I was wondering if you'd like to purchase it.
man plays game, man wins game. news at 11. (Score:2)
yep, sounds about right.
Quite the enigma (Score:2)
He gives money to the political party who sees his lifestyle as immoral and illegal if they had their ways.
PayPal (Score:2)
Create an a tax on IRAs (Score:2)
For IRAs creating earnings from assets other than Cash and Publicly-Traded Securities / Commodities or Options contracts on the same purchased from a SEC or CFTC-regulated exchange.
As far as I know... everything else is exclusively to wealthy / sophisticated people.
This is actually not difficult to duplicate (Score:4)
Who Is ProPublica? (Score:2, Insightful)
ProPublic is one of those names that sounds like it was specifically designed to misguide people into thinking it's a unbiased and benevolent news source, but turns out to be a propaganda machine with an opposite agenda.
They seem intent on stirring up controversy with innuendo and utter falsehoods. Now Peter Theil is being villainized because the used a Roth IRA for it's intended purpose, successfully. It's fine to be a loser investor with ~$39k in your Roth, but if you succeed and turn it into real money y
Clickbait bullshit. (Score:3)
Envy: The worst of sins (Score:4, Informative)
Good for him (Score:3)
Bias warning (Score:3)
Case in point, in https://www.propublica.org/art... [propublica.org] they call for taxation on "increase of wealth." This is an absolutely awful idea.
Example: I own a house that has doubled in value in the last five years. They would have me pay taxes on the value of that increase every year. I'd have to sell the house to do that. This is somewhat inconvenient in that I f*king live there.
Similarly, the value of Mr. Bezos Amazon holdings have increased by Billions. Should he be forced to sell to pay taxes, or should he be taxed when he finally does sell? The latter is currently the case.
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Well, at least under previous rules, small investors weren't able to buy startup stocks/IPOs. Here's a simple summary of why not: https://www.foxbusiness.com/fe... [foxbusiness.com]
Re: "stock deals unavailable to most people"? (Score:2)
Thatâ(TM)s how I read this. If thatâ(TM)s the case, the articleâ(TM)s insinuation that he did something unethical is very misplaced.
Re: "stock deals unavailable to most people"? (Score:3)
You obviously haven't invested in startups. Random people on the street aren't generally allowed to invest in pre-IPO startups. You have to be what is referred to as an accredited investor. This is essentially only for rich people. You can also become accredited by becoming a professional trader, but most accredited investors get that way simply by being rich.