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Super-sized IRAs Among the Super Rich (and among Savvy Investors as Well!)

Published on October 2, 2014

In connection with a Senate Finance Committee Hearing into tax issues regarding retirement, it was revealed that at the end of 2011, there were several hundred (314) taxpayers with more than $25 million each in tax-deferred IRAs.* Using figures from the Internal Revenue Service, the Government Accounting Office (GAO) estimated that a total of $81 billion was held in these individuals’ IRAs. That comes out to an average of—are you ready?–$258 million each.

These super-sized individual retirement accounts were not built merely on investing in mutual funds. Many–as Mitt Romney revealed about his own hefty retirement finances during his last presidential bid—were the result of investing in startup company stock. (Romney’s retirement accounts were estimated to be worth over $100 million at the time.)


SUPERSIZED Retirement Savings with a Self-Directed IRA

Although most Americans don’t build up that much retirement wealth, it is not impossible to have at least $1 million in an IRA. According to the GAO numbers for 2011 released in a report this month, 622,000 taxpayers had between $1 million and $5 million in IRA accounts that year; 9,000 taxpayers had more than $5 million in their IRAs. The Senate report stated that many of those high-net-worth individuals held their super-sized investments in Roth IRAs. Since the funds were invested in alternative assets (early-stage companies) this implies the accounts were self-directed Roth IRAs.

Self-Directed IRAs = Flexibility

Although contribution limits to Roth IRAs are relatively modest compared to these retirement fund assets (a maximum of $5,500 in 2014, $6,500 for those 50 and older), the flexibility offered through self-direction allows investors to build up sizable IRAs by investing in startup companies or take advantage of equity funding opportunities if they are accredited investors. The self-directed IRA invests in the early stage company and owns the shares in that firm. Here’s some inspiration for growing a self-directed retirement account through equity funding: Forbes reported that Yelp founder Max R. Levchin held millions of shares of that site in his Roth IRA while billionaire investor Peter Thiel put shares of PayPal and early shares of Facebook in his Roth account.

You Don’t Have to be Super-Rich to Supersize Your Retirement Account

Account holders of self-directed retirement plans enjoy all the tax advantages of an IRA; in the case of a Roth IRA, all contributions made to the account are on an after-tax basis but all withdrawals made in retirement are tax free. You can open a self-directed Roth IRA from new funds or with rollover funds from a 401(k) plan.

Next Generation Trust Services Can Answer Your Questions About Alternative Assets Allowed Through Self-Direction

You don’t have to be super-rich to supersize your retirement account but if you plan to self-direct your retirement investments, you do need to research and understand your target investments. The transaction specialists at Next Generation Trust Services can answer questions you may have about alternative assets allowed through self-direction; contact them at Info@NextGenerationTrust.com or call (888) 857-8058 for guidance.


*Source: www.forbes.com/sites/janetnovack/2014/09/16/retirement-rich-list-gao-estimates-314-taxpayers-have-iras-averaging-258-million-each/

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