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> Open a Roth with $2,000 or less You need a MAGI of less than $139,000 to do that. That includes dividends and capital gains, so it's unlikely post-Paypal Th

> Open a Roth with $2,000 or less You need a MAGI of less than $139,000 to do that. That includes dividends and capital gains, so it's unlikely post-Paypal Thiel ever made that little. Pre-Paypal Thiel might have. > Get a sweetheart deal to buy a stake in a startup that has a good chance of one day exploding in value. This might happen for post-Paypal Thiel. Definitely not pre. This is way easier said than done unless you have good access to deal flow (he does) and founders willing to pay for the privilege of having you as an investor vs. some random VC. > Pay just fractions of a penny per share You're not paying fractions of a penny per share for something that has a "good chance of one day exploding in value." This investment doesn't exist. I'd love to see his specific investments. I have a feeling a handful from a specific time window made up the bulk his his returns.

didibus 5y ago
> This might happen for post-Paypal Thiel. Definitely not pre. This is way easier said than done unless you have good access to deal flow (he does) and founders willing to pay for the privilege of having you as an investor vs. some random VC. He purchased shares of PayPal at 0.001 when he first founded it using his Roth IRA, it's all explained in the article. > You're not paying fractions of a penny per share for something that has a "good chance of one day exploding in value." This investment doesn't exist That's where the article alludes to something maybe slightly fraudulent, for him to have his PayPal startup at the beginning sell shares to himself at 0.001$, as a special declared "employee discount rate". He then managed to make 28 million in his Roth IRA from the IPO of PayPal which he paid no taxes on, because his private PayPal shares were all in the Roth IRA. Then he took that 28 million and reinvested it in Facebook, his Hedge Fund, his other startup Palantir and others, and those investment further did not get taxed, because the whole pool of money was all in the Roth IRA from this point on.
temp_praneshp 5y ago
> > Open a Roth with $2,000 or less > You need a MAGI of less than $139,000 to do that. Is there a reason trad -> roth doesn't work in this scenario?
- dehrmann 5y ago
  I think it would work. The IRA would either need to be a 401(k) rollover (MAGI limit, again), or from before.
junar 5y ago
As reported in the article, Thiel's income was below the income limit in the year of contribution, and he only needed one year's contribution to execute the strategy. Also, income doesn't matter nowadays. Because Congress removed the income limit on Roth conversions (also reported in the article), anyone is free to make a nondeductible traditional IRA contribution and convert it to Roth, which achieves a similar effect.

didibus 5y ago

> This might happen for post-Paypal Thiel. Definitely not pre. This is way easier said than done unless you have good access to deal flow (he does) and founders willing to pay for the privilege of having you as an investor vs. some random VC. He purchased shares of PayPal at 0.001 when he first founded it using his Roth IRA, it's all explained in the article. > You're not paying fractions of a penny per share for something that has a "good chance of one day exploding in value." This investment doesn't exist That's where the article alludes to something maybe slightly fraudulent, for him to have his PayPal startup at the beginning sell shares to himself at 0.001$, as a special declared "employee discount rate". He then managed to make 28 million in his Roth IRA from the IPO of PayPal which he paid no taxes on, because his private PayPal shares were all in the Roth IRA. Then he took that 28 million and reinvested it in Facebook, his Hedge Fund, his other startup Palantir and others, and those investment further did not get taxed, because the whole pool of money was all in the Roth IRA from this point on.

temp_praneshp 5y ago

> > Open a Roth with $2,000 or less > You need a MAGI of less than $139,000 to do that. Is there a reason trad -> roth doesn't work in this scenario?

dehrmann 5y ago
I think it would work. The IRA would either need to be a 401(k) rollover (MAGI limit, again), or from before.

junar 5y ago

As reported in the article, Thiel's income was below the income limit in the year of contribution, and he only needed one year's contribution to execute the strategy. Also, income doesn't matter nowadays. Because Congress removed the income limit on Roth conversions (also reported in the article), anyone is free to make a nondeductible traditional IRA contribution and convert it to Roth, which achieves a similar effect.