Wills, Trusts & Estates Prof Blog

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

Tuesday, September 14, 2021

America Is Spending a Fortune to Help Rich People Retire in Luxury

Estate planningAffluent boomers have been able to take advantage of federal programs originally conceived for ordinary families. 

Roth IRAs are a useful way to save money for retirement and are used by many Americans. Although fashioned for ordinarily families, ultra rich people like tech billionaire Peter Thiel have been able to maximize the usage of Roth IRAs. 

Thiel has been able to use the Roth IRA o accumulate more than $5 billion. Nonprofit journalism shop ProPublica ran an exposé in June "revealing how a small number of extremely wealthy folks had ended up with Roths—federally subsidized retirement accounts meant for middle-class savers–worth tens to hundreds of millions of dollars and up." Thiel was able to do so by "stuffing" his Roth IRA with "wildly undervalued "founders shares" of pre-IPO startups—potentially an illegal tactic—and then watching as their values rose exponentially, and completely tax-free." 

According to the nonpartisan Joint Committee on Taxation, "as of 2019, more than 28,000 Americans held combined (Roth and tradition) IRA balances of $5 million or more and 497 taxpayers had balances of at least $25 million. The latter group had socked away a combined $77 billion in their IRAs—on average, more than $150 million each." 

According to Steve Rosenthal, a tax attorney and senior fellow at Urban-Brookings Tax Policy Center, "the government spends a fortune subsidizing a whole range of retirement plans whose benefits flow overwhelmingly to America's most affluent. . .It's unbelievable the amounts of dollars at stake, and how titled they are to the high end." 

See Michael Mechanic, America Is Spending a Fortune to Help Rich People Retire in Luxury, Mother Jones, September 1, 2021. 

Special thanks to Naomi Cahn (Harold H. Greene Professor of Law, University of Virginia School of Law) for bringing this article to my attention.


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