Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Wednesday, June 30, 2021

The ultra-wealthy have made full use of Roth individual retirement accounts. Here’s how you can do the same

Wealth taxWhen most of us think about using the tax code to benefit financially, we think that the avenue is only available to rich people. 

Although it is true that wealthy individuals have "amassed hundreds of millions—or even billions—of dollars in tax-sheltered Roth individual retirement accounts," the strategy is available to virtually anyone. 

According to Ed Slott, CPA and founder of Ed Slott and Company, "[t]he great thing about the Roth is that it's everyone's best tax shelter." 

With traditional 401(k) plans and IRAs, "you generally get a tax break when you make contributions and then pay taxes on the withdrawals in retirement." On the other hand, Roth accounts have no up front tax break, but qualified withdrawals are excluded from federal income taxes. 

One of the ultra-wealth individuals who has taken advantage of the Roth IRA is Peter Thiel, one of Paypal's founders. Thiel's account was worth $5 billion as of 2019, a very steep increase from the $2,000 it was worth in 1999. 

You should place assets that have high growth potential in a self-directed IRA or a standard Roth IRA, which do not have required minimum distributions and can help avoid the uncertainty of future tax rates. 

See Sarah O'Brien, The ultra-wealthy have made full use of Roth individual retirement accounts. Here’s how you can do the same, CNBC, June 24, 2021. 

Special thanks to David S. Luber (Florida Probate Attorney) for bringing this article to my attention.

https://lawprofessors.typepad.com/trusts_estates_prof/2021/06/the-ultra-wealthy-have-made-full-use-of-roth-individual-retirement-accounts-heres-how-you-can-do-the.html

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