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What is your limit on how much money should be "sheltered" by a Roth IRA? At the time Thiel was not an ultra-wealthy billionaire. From the article. “I said, ‘

What is your limit on how much money should be "sheltered" by a Roth IRA? At the time Thiel was not an ultra-wealthy billionaire. From the article. “I said, ‘If you really think this is going to be big, you know, you might want to consider this new Roth,’” recalled Anderson The Roth IRA is intended to be a retirement vehicle for people to make contributions too with the intention of it not being touched till after retirement. As a perk, it is not taxed. Maybe its not within the "spirit" of the law, but I hardly see how trying to create incredibly granular restrictions on start up founders or people that believe they have a better investing strategy is the right approach. What about making it easier for normal people to have access to the same IPOs that Thiel had access to?

sp332 5y ago
And Roth IRAs are funded post-tax. That means he paid taxes on the income already, before he put the money into the IRA. That's why it's "tax-free".
- peytoncasper 5y ago
  I think that's fair, although, and correct me if I am wrong. Its his current income tax, so it's highly likely that his income tax bracket is lower than the cap gains tax that would normally be applied on investments like this. That being said, I tend to agree. Its to prevent double tax in which you're trying to promote a better investment. Your long term health and retirement.
  - pontifk8r 5y ago
    I'm correcting you: Unless he makes less than $40,000 in salary, the capital gains tax rates are going to be lower than the tax rate for ordinary income. The chart in this article reveals more: https://www.investopedia.com/articles/personal-finance/101515/comparing-longterm-vs-shortterm-capital-gain-tax-rates.asp https://www.investopedia.com/articles/personal-finance/10151...
- colordrops 5y ago
  Are you suggesting any investment that is made after you've paid taxes on it should be tax free regardless of growth? Roth is an exception, not the rule. Tax is cyclical, not a one time thing, by design. It was never the case that you only ever paid tax once, and it's confusing to me that it's even being suggested otherwise. Roth is a very special exception to this.
  - sp332 5y ago
    Not just anything, but the other kind of IRA lets you put money in without paying income tax first.
    - colordrops 5y ago
      Why are you ignoring the most significant difference with the other kind of IRA?
      - sp332 5y ago
        That with a Roth IRA you pay the tax rate when you're working, and a normal one you pay according to the tax rate when you're retired?
        colordrops 5y ago
        Once again you are leaving out an important detail. The amount of money that you pay the tax on for a Roth is often orders of magnitude less than a traditional IRA, regardless of rate. You are avoiding A LOT more tax with a Roth. It's a fixed initial payment with a Roth, yet it scales indefinitely with a traditional IRA. It's a huge difference.
        sp332 5y ago
        I was never clear on how much difference it made. Either you pay (say) 20% up front or you pay 20% later. With compound growth multiplying in the middle, does it really make a difference to how much you have at the end? 0.8 * (1.07 ^ 20) == (1.07 ^ 20) * 0.8
aeturnum 5y ago
> What is your limit on how much money should be "sheltered" by a Roth IRA? This is what I am saying the article is raising! I'd limit it to $10m myself. Seems like that would be enough to retire on. Probably tie it to inflation? What number would you pick? > What about making it easier for normal people to have access to the same IPOs that Thiel had access to? I would be fine with that but it seems like a separate issue?
- unstatusthequo 5y ago
  How about freedom and no limit? Why limit?
  - mlcrypto 5y ago
    HN is full of liberals that hate wealth and want anything you make an excess. That's the beauty of Bitcoin, you can't have what I got
- peytoncasper 5y ago
  I'm not sure I would pick a number if I am honest, but I can understand that a number probably exists. If this wasn't Thiel but rather someone else who made 60k/yr or 120k/yr, I don't think this would even be a conversation. So what if they turned their Roth IRA into 100 million. In my opinion that is encouraging the right behavior and the intent. Investing 2,000 per year of their wages and trying to be somewhat forward thinking about their retirement. Now there is the open question of if an average person is able to truly analyze such investments, but I think that is a separate issue as well.
- deleted 5y ago
  [deleted]
- sokoloff 5y ago
  I'm fine with limiting additional contributions to the Roth IRA once its value passes some number (and around $10M, indexed to CPI, feels reasonable). I'm not bothered by investments whose value grows beyond that figure, to be honest, mostly because it's not clear what you'd actually do about it without trying to value unrealized positions and more likely compel transactions. (Valuing listed shares is relatively straightforward, but compelling transactions is abhorrent to me.)
RhodoGSA 5y ago
>What about making it easier for normal people to have access to the same IPOs that Thiel had access to? I agreed with everything you said but the above. It gets weird when financially illiterate have access to 'Private companies'. Look at what happened to dogecoin. Edit: Financially literate is a loose term, but a million in assets not including real estate does seem excessive.
- nickpp 5y ago
  Honest question: do you think it’s a good idea to protect people from themselves?
  - caffeine 5y ago
    The answer isn’t binary, it’s a sliding scale between 0 (zeroism, nobody is allowed to be harmed by anything) and 1 (do whatever you want). Seat belts, road signs, the FAA, the FCC, the FDA … all these are protecting people from harming themselves. I don’t think it’s possible to have a functioning society at 0 or 1, but whether 0.35 or 0.55 is a better setpoint is hard to say for sure.
    - nickpp 5y ago
      So more like yes for some cases, no for others. But how do you choose?
      - Supermancho 5y ago
        Consensus. Either direct or indirect, because that's part of what a society is.

sp332 5y ago

And Roth IRAs are funded post-tax. That means he paid taxes on the income already, before he put the money into the IRA. That's why it's "tax-free".

peytoncasper 5y ago
I think that's fair, although, and correct me if I am wrong. Its his current income tax, so it's highly likely that his income tax bracket is lower than the cap gains tax that would normally be applied on investments like this. That being said, I tend to agree. Its to prevent double tax in which you're trying to promote a better investment. Your long term health and retirement.
- pontifk8r 5y ago
  I'm correcting you: Unless he makes less than $40,000 in salary, the capital gains tax rates are going to be lower than the tax rate for ordinary income. The chart in this article reveals more: https://www.investopedia.com/articles/personal-finance/101515/comparing-longterm-vs-shortterm-capital-gain-tax-rates.asp https://www.investopedia.com/articles/personal-finance/10151...
colordrops 5y ago
Are you suggesting any investment that is made after you've paid taxes on it should be tax free regardless of growth? Roth is an exception, not the rule. Tax is cyclical, not a one time thing, by design. It was never the case that you only ever paid tax once, and it's confusing to me that it's even being suggested otherwise. Roth is a very special exception to this.
- sp332 5y ago
  Not just anything, but the other kind of IRA lets you put money in without paying income tax first.
  - colordrops 5y ago
    Why are you ignoring the most significant difference with the other kind of IRA?
    - sp332 5y ago
      That with a Roth IRA you pay the tax rate when you're working, and a normal one you pay according to the tax rate when you're retired?
      - colordrops 5y ago
        Once again you are leaving out an important detail. The amount of money that you pay the tax on for a Roth is often orders of magnitude less than a traditional IRA, regardless of rate. You are avoiding A LOT more tax with a Roth. It's a fixed initial payment with a Roth, yet it scales indefinitely with a traditional IRA. It's a huge difference.
        sp332 5y ago
        I was never clear on how much difference it made. Either you pay (say) 20% up front or you pay 20% later. With compound growth multiplying in the middle, does it really make a difference to how much you have at the end? 0.8 * (1.07 ^ 20) == (1.07 ^ 20) * 0.8

aeturnum 5y ago

> What is your limit on how much money should be "sheltered" by a Roth IRA? This is what I am saying the article is raising! I'd limit it to $10m myself. Seems like that would be enough to retire on. Probably tie it to inflation? What number would you pick? > What about making it easier for normal people to have access to the same IPOs that Thiel had access to? I would be fine with that but it seems like a separate issue?

unstatusthequo 5y ago
How about freedom and no limit? Why limit?
- mlcrypto 5y ago
  HN is full of liberals that hate wealth and want anything you make an excess. That's the beauty of Bitcoin, you can't have what I got
peytoncasper 5y ago
I'm not sure I would pick a number if I am honest, but I can understand that a number probably exists. If this wasn't Thiel but rather someone else who made 60k/yr or 120k/yr, I don't think this would even be a conversation. So what if they turned their Roth IRA into 100 million. In my opinion that is encouraging the right behavior and the intent. Investing 2,000 per year of their wages and trying to be somewhat forward thinking about their retirement. Now there is the open question of if an average person is able to truly analyze such investments, but I think that is a separate issue as well.
deleted 5y ago
[deleted]
sokoloff 5y ago
I'm fine with limiting additional contributions to the Roth IRA once its value passes some number (and around $10M, indexed to CPI, feels reasonable). I'm not bothered by investments whose value grows beyond that figure, to be honest, mostly because it's not clear what you'd actually do about it without trying to value unrealized positions and more likely compel transactions. (Valuing listed shares is relatively straightforward, but compelling transactions is abhorrent to me.)

RhodoGSA 5y ago

>What about making it easier for normal people to have access to the same IPOs that Thiel had access to? I agreed with everything you said but the above. It gets weird when financially illiterate have access to 'Private companies'. Look at what happened to dogecoin. Edit: Financially literate is a loose term, but a million in assets not including real estate does seem excessive.

nickpp 5y ago
Honest question: do you think it’s a good idea to protect people from themselves?
- caffeine 5y ago
  The answer isn’t binary, it’s a sliding scale between 0 (zeroism, nobody is allowed to be harmed by anything) and 1 (do whatever you want). Seat belts, road signs, the FAA, the FCC, the FDA … all these are protecting people from harming themselves. I don’t think it’s possible to have a functioning society at 0 or 1, but whether 0.35 or 0.55 is a better setpoint is hard to say for sure.
  - nickpp 5y ago
    So more like yes for some cases, no for others. But how do you choose?
    - Supermancho 5y ago
      Consensus. Either direct or indirect, because that's part of what a society is.