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Comment by w0mbat | Hacker News Reader

Headline could be "Person uses retirement account to save money for retirement."

Why not? Similarly, another of today's headlines could also be 'Property damage inconveniences some in Florida'.

The fact that someone used a vehicle that limits your yearly contribution to $5500 a year to amass $5 billion is worth investigating. The investment return needed for that is close to 60% annually, an inconceivably high rate of return for any long period of time.

"an inconceivably high rate of return"

I don't think that word means what you think it means

I mean, considering no-one has achieved that rate of return (in the public markets) with compounding ever, that's probably a fair observation. The closest was the Medallion Fund, but that's a non-compounded return at $10B AUM.

But also somewhat irrelevant as the main point of the article focuses on that first investment ($2K -> $33M in 2-3 years via private Paypal shares).

I have no skin in the game but "in the public markets" is a very key part of this discussion. If he did purchase his stock allocations from founding PayPal (regardless of of if this was legal) this would have not been in the public market. This is an extremely high risk time and money investment that could have been worth $0 the next day. This is why a lot of people end up trying to start a startup. To get huge financial gains for themselves.

Yes, this is what is being criticized. Other investors have no ability to do this, and there is little to know what to verify that the stock that was purchased was actually fairly evaluated. If it wasn’t then he was able to invest far more money tax free than should be allowed.

I'm not quite sure I follow. Most people who work for a startup (<10 people) and receive stocks get a similar deal. I've had to buy exercise options at previous companies. I also know people who have had options for $0.10/share for stocks that were then trading at $1.00/share after IPO.

If I worked at a startup pre-Series A, I got 1000 shares at $0.001/share, and then 1 year later they got a Series A and my shares became valued at $0.01/share, and then in a few more years we IPO'd and my shares became worth $100/share the IRS shouldn't have the ability to say "woopsie, yea, you actually paid too little taxes because that company that succeeded was actually worth way more than we expected back when it looked like it was going to fail"

That's just my opinion. I'm not sure if I'm misunderstanding something here. A startup is a high risk prospect. If you buy shares of a startup you're essentially putting money into a shredder in hopes that people pay you a bunch of money to play with the confetti. When a pre-Series A startup offers me "$50k/year in stock options" I instantly value that at $0/year in income mentally because there's no guarantee for any return. Its like options trading penny stocks.

Sure, start ups are insanely risky, but that doesn't mean stock in them can't be incredibly undervalued, and often is. Any tax incentivized investment plan, that allows investment in private companies, whose worth is going to very difficult for the government to judge, given there is a lack of public bids on them, is ripe with opportunities for fraud.

Yes... the investment return from Facebook

If you think "being very good at something" should be illegal, you are going to hate the Olympics.

> "Person uses retirement account to save money for retirement."

... with a few extra "twists" that utterly subvert the intention of the Roth IRA, making it possible to accumulate an astronomical dynastic fortune without having to pay taxes on it like normal people.

The intent of the article is to point out how the rich truly take advantage of existing tax laws/loopholes to stay even more rich.

No one is claiming Thiel did anything illegal. But it does seem a bit preposterous that billionaires can amass $5B Roth IRA accounts.

I'm curious how he was able to get a Roth IRA in the first place. Apparently Roth IRA began in 1997 and there's a contribution limit if you make above a certain amount.Given that Thiel started "Thiel Capital Management" in 1996, I'm willing to bet he was above the earning limit.

Probably by a traditional IRA to Roth IRA conversion.

Anybody can have a Roth IRA. Even if you're over the income limit for a Roth, you can still convert a traditional to a Roth IRA after you pay taxes on the amount. These conversions are pretty common and well known.

Like every other SV startup, he was paid a decent salary with lots of stock and thus qualified under the income limits.

Says in the article he was below the limit.

If you're reasonably wealthy and you start a firm, there's no problem just taking a smaller salary. It's a little bit surprising that the rules don't address this though. Why not just say Roth IRA is for people with net worth under some figure? Or as mentioned in the article, put a cap on the amount of tax exempt money?

The intent of ProPublica's entire series of articles is to imply that wealthy Americans are immorally building their wealth. They are taking advantage of the fact that the public doesn't have basic financial literacy to turn the public against wealthy Americans and some of our most important systems in America (Entrepreneurship, Joint-stock companies, etc).

Thiel bought a lotto ticket in his Roth IRA, after which he invested the earnings into other high-risk ventures which also worked out.

It is fascinating how the ProPublica articles are redistributed in mainstream media (BBC, CNN, etc) even though they are obviously wrong, biased and even based on stolen private data.

It’s almost as if someone is having an agenda…

The big argument was whether it was a true lotto ticket (say buying Bitcoin at 1 cent, where everyone accepts it's valued at 1 cent), or whether it was actually self dealing (real best-estimate value of shares was maybe $0.10 a share, and he bought in IRA for $0.001 a share). That means the true value of his IRA "contribution" becomes $170,000 instead of $1,700, which is clearly tax evasion.

Still a lotto ticket, but that first transaction becomes a lot less innocent.

I have basic financial literacy, and found that article insightful and alarming. Maybe your political views coloured your dismissal of the article series and “the public”.

I don’t think tax shelters for retirement accounts were designed to let financiers such as Thiel and Romney buy undervalued promising lottery tickets from themselves or their buddies, or should be used as such.

The (self directed) Roth IRA was "designed" to let people invest their money into assets that they choose.

He wasn't a billionaire when he started the IRA account.

... in ways that are not accessible to the everyday person.

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