I think it can be effective to put a face, so to speak, to an issue to show it isn’t some abstract problem and to also show the degree to which it is a problem.
> Yet, from the start, a small number of entrepreneurs, like Thiel, made an end run around the rules: Open a Roth with $2,000 or less. Get a sweetheart deal to buy a stake in a startup that has a good chance of one day exploding in value. Pay just fractions of a penny per share, a price low enough to buy huge numbers of shares. Watch as all the gains on that stock — no matter how giant — are shielded from taxes forever, as long as the IRA remains untouched until age 59 and a half. Then use the proceeds, still inside the Roth, to make other investments.
I wonder how the author determined PayPal had a “good chance of exploding in value”? Can they predict the future? Or is it using hindsight to make things seem less risky than they were.
Would you recommend a young person today to max out their Roth contribution with the equity of a startup they are working on?
The article also does not mention any of the downsides of Roth accounts.
They also talk about the system, how it came to be, etc., for example:
“About a decade after the creation of the Roth, Congress made it even easier to turn the accounts into mammoth tax shelters.”
> Would you recommend a young person today to max out their Roth contribution with the equity of a startup they are working on?
In some sense, one could view the detailed reporting as a guidebook for how anyone can do this too!
True, I should credit the article for giving the background, but I would have preferred it to be the focus instead of someone who won the lottery.
>In some sense, one could view the detailed reporting as a guidebook for how anyone can do this too!
Roths have never been a secret. They just have had very low caps (still only $6k per person), and most people would rather 95% chance of getting 5% returns on their $6k investment rather than a 0.00001% chance of getting 1,000,000% return on their $6k investment.
Obviously, a richer person has more ability to gamble and thus profit from this, but the article frames it as a guaranteed mechanism to evade taxes (uses the term “side step”), when in reality, it is still very much a gamble (assuming there is no fraud).
Alternatively: "About a decade later, politicians continued to demonstrate an inability to make hard tradeoffs and goosed short-term tax revenue in exchange for long-term tax-free growth of these accounts. Now, some people are mad about that."