Thiel makes billions all tax free

[gipper]

Theil makes a profit of 5 billion dollars less his $2,000 initial investment, and pays zero tax.

Yup.
That's how Roth IRAs work.

Don't you have one?

I do. However our stupid incompetent government shouldn’t allow this.

 

[Toddsterpatriot]

Can anyone explain how this fund operates, in a nutshell? You give them some money and they invest them in stock market or something like that?

A Roth IRA is taxed before the income is deposited, what gains you make are not taxed. When you are eligible for withdrawal, you are not taxed.

Why? That is not logical. If you invested 100 bucks and got back 1000, you should pay income tax.

What Is a Roth IRA?​

A Roth IRA is an individual retirement account (IRA) that allows qualified withdrawals on a tax-free basis provided certain conditions are satisfied. Established in 1997, it was named after William Roth, a former Delaware Senator.1


Roth IRAs are similar to traditional IRAs, with the biggest distinction between the two being how they’re taxed. Roth IRAs are funded with after-tax dollars; the contributions are not tax-deductible. But once you start withdrawing funds, the money is tax-free. Conversely, traditional IRA deposits are generally made with pretax dollars; you usually get a tax deduction on your contribution and pay income tax when you withdraw the money from the account during retirement.2


This and other key differences make Roth IRAs a better choice than traditional IRAs for some retirement savers.

Roth IRA: What It Is and How to Open One

A Roth IRA is a special individual retirement account (IRA) in which you pay taxes on contributions, and then all future withdrawals are tax-free.

www.investopedia.com

Yes, thanks. I already briefly read such information. But I don't get what means pre-tax and after-tax dollars in this case.

Okay, let's assume I earn 1000 dollars every month (that is net gains, I already paid taxes from my salary). And out of this money I want to invest 200 dollars in Roth IRA.

Will be this money considered as after-tax dollars and all my gains will be tax-free?

Will be this money considered as after-tax dollars and all my gains will be tax-free?

Yes.

But that is illogical. If I earn an income out of my investments, then why I shouldn't pay an income tax?

The first IRAs gave you a write-off for the contribution, and then taxed your withdrawals.
Roth IRAs have after tax contributions and tax free withdrawals.
Why is either illogical?

Because I would get an income out of my Roth IRA investment. And this income should be taxed as some another income.

Frankly, I don't get the reason in dividing my income in pre-tax and after-tax gains. I get a salary, pay taxes out of it, spend some of it for investment, and pay taxes if I earn money out of my investment (pay taxes on my gains. That is, if I invest 200 dollars and gain 500 dollars, then I will pay taxes out of 300 dollars).

That is as simple as that and is a fair thing, isn't it?

Because I would get an income out of my Roth IRA investment.

Yup.

And this income should be taxed as some another income.

Nope.

I don't get the reason in dividing my income in pre-tax and after-tax gains.

Do we have enough savings in the US, or would more be helpful?
Can you depend on Social Security or an employer pension to meet all your retirement needs?

That is as simple as that and is a fair thing, isn't it?

I think encouraging people to save more is fair.

 

[Toddsterpatriot]

I do. However our stupid incompetent government shouldn’t allow this.

Why not? There are contribution and income limits.

 

[gipper]

I do. However our stupid incompetent government shouldn’t allow this.

Why not? There are contribution and income limits.

Apparently not. He invested $2k and made $5 billion. All tax free. Yippee!!!

 

[Toddsterpatriot]

I do. However our stupid incompetent government shouldn’t allow this.

Why not? There are contribution and income limits.

Apparently not. He invested $2k and made $5 billion. All tax free. Yippee!!!

Apparently not.

There are, really.

He invested $2k

Like I said, contribution limits.

 

[ESay]

Can anyone explain how this fund operates, in a nutshell? You give them some money and they invest them in stock market or something like that?

A Roth IRA is taxed before the income is deposited, what gains you make are not taxed. When you are eligible for withdrawal, you are not taxed.

Why? That is not logical. If you invested 100 bucks and got back 1000, you should pay income tax.

What Is a Roth IRA?​

A Roth IRA is an individual retirement account (IRA) that allows qualified withdrawals on a tax-free basis provided certain conditions are satisfied. Established in 1997, it was named after William Roth, a former Delaware Senator.1


Roth IRAs are similar to traditional IRAs, with the biggest distinction between the two being how they’re taxed. Roth IRAs are funded with after-tax dollars; the contributions are not tax-deductible. But once you start withdrawing funds, the money is tax-free. Conversely, traditional IRA deposits are generally made with pretax dollars; you usually get a tax deduction on your contribution and pay income tax when you withdraw the money from the account during retirement.2


This and other key differences make Roth IRAs a better choice than traditional IRAs for some retirement savers.

Roth IRA: What It Is and How to Open One

A Roth IRA is a special individual retirement account (IRA) in which you pay taxes on contributions, and then all future withdrawals are tax-free.

www.investopedia.com

Yes, thanks. I already briefly read such information. But I don't get what means pre-tax and after-tax dollars in this case.

Okay, let's assume I earn 1000 dollars every month (that is net gains, I already paid taxes from my salary). And out of this money I want to invest 200 dollars in Roth IRA.

Will be this money considered as after-tax dollars and all my gains will be tax-free?

Will be this money considered as after-tax dollars and all my gains will be tax-free?

Yes.

But that is illogical. If I earn an income out of my investments, then why I shouldn't pay an income tax?

The first IRAs gave you a write-off for the contribution, and then taxed your withdrawals.
Roth IRAs have after tax contributions and tax free withdrawals.
Why is either illogical?

Because I would get an income out of my Roth IRA investment. And this income should be taxed as some another income.

Frankly, I don't get the reason in dividing my income in pre-tax and after-tax gains. I get a salary, pay taxes out of it, spend some of it for investment, and pay taxes if I earn money out of my investment (pay taxes on my gains. That is, if I invest 200 dollars and gain 500 dollars, then I will pay taxes out of 300 dollars).

That is as simple as that and is a fair thing, isn't it?

Because I would get an income out of my Roth IRA investment.

Yup.

And this income should be taxed as some another income.

Nope.

I don't get the reason in dividing my income in pre-tax and after-tax gains.

Do we have enough savings in the US, or would more be helpful?
Can you depend on Social Security or an employer pension to meet all your retirement needs?

That is as simple as that and is a fair thing, isn't it?

I think encouraging people to save more is fair.

Well, encouraging people to save and savings per se is a good thing. But balanced state budget is also a good thing. If you don't get taxes in one place, you would need to get them more in another. Or cut state spendings, or borrow money.

 

[wamose]

It sounds like Thiel made a fortune on a great stock pick. It's more likely that this windfall, much like the option Hillary had years ago, was the result of some inside information, which would be illegal. Then again, maybe he's just a supremely lucky guy.

 

[Toddsterpatriot]

Well, encouraging people to save and savings per se is a good thing.

Excellent! We agree.

But balanced state budget is also a good thing.

Did Thiel's $2000 purchase somehow unbalance a budget?

 

[Toddsterpatriot]

It's more likely that this windfall, much like the option Hillary had years ago, was the result of some inside information, which would be illegal.

He was part owner of the company before it went public.

 

[ESay]

Well, encouraging people to save and savings per se is a good thing.

Excellent! We agree.

But balanced state budget is also a good thing.

Did Thiel's $2000 purchase somehow unbalance a budget?

Of course not. But billions (?) of dollars underpaid from various tax free income sources do.

 

[Toddsterpatriot]

But billions (?) of dollars underpaid from various tax free income sources do.

How did Thiel's Roth billions unbalance any budget?

 

[ESay]

But billions (?) of dollars underpaid from various tax free income sources do.

How did Thiel's Roth billions unbalance any budget?

I was talking not only about his money. How many earnings are exempt from taxation every year?

 

[Toddsterpatriot]

How many earnings are exempt from taxation every year?

Every dollar earned in an IRA or 401K or 403B is "exempt" during the accumulation phase.

 

[ESay]

How many earnings are exempt from taxation every year?

Every dollar earned in an IRA or 401K or 403B is "exempt" during the accumulation phase.

Okay, I have a personal question. You are not obliged to answer, of course.

How many taxes do you pay every year? (Or let's say an average person should pay in the place where you live). And how many other 'fees' one has to pay (insurance, retirement payments etc)?

 

[Toddsterpatriot]

How many earnings are exempt from taxation every year?

Every dollar earned in an IRA or 401K or 403B is "exempt" during the accumulation phase.

Okay, I have a personal question. You are not obliged to answer, of course.

How many taxes do you pay every year? (Or let's say an average person should pay in the place where you live). And how many other 'fees' one has to pay (insurance, retirement payments etc)?

I pay all the typical taxes, fees, insurance premiums that the typical person pays.

 

[ESay]

How many earnings are exempt from taxation every year?

Every dollar earned in an IRA or 401K or 403B is "exempt" during the accumulation phase.

Okay, I have a personal question. You are not obliged to answer, of course.

How many taxes do you pay every year? (Or let's say an average person should pay in the place where you live). And how many other 'fees' one has to pay (insurance, retirement payments etc)?

I pay all the typical taxes, fees, insurance premiums that the typical person pays.

And what percentage of the income goes for that?

 

[Toddsterpatriot]

How many earnings are exempt from taxation every year?

Every dollar earned in an IRA or 401K or 403B is "exempt" during the accumulation phase.

Okay, I have a personal question. You are not obliged to answer, of course.

How many taxes do you pay every year? (Or let's say an average person should pay in the place where you live). And how many other 'fees' one has to pay (insurance, retirement payments etc)?

I pay all the typical taxes, fees, insurance premiums that the typical person pays.

And what percentage of the income goes for that?

The typical percentage for people in my situation.

 

[gipper]

I do. However our stupid incompetent government shouldn’t allow this.

Why not? There are contribution and income limits.

Apparently not. He invested $2k and made $5 billion. All tax free. Yippee!!!

Apparently not.

There are, really.

He invested $2k

Like I said, contribution limits.

View attachment 507146

Read and get educated for once.


The late Sen. William Roth Jr., a Delaware Republican, pushed through a law establishing the Roth IRA in 1997 to allow “hard-working, middle-class Americans” to stow money away, tax-free, for retirement. The Clinton administration didn’t want to give a fat tax break to wealthy people who were likely to save anyway, so it blocked Americans making more than $110,000 ($160,000 for a couple) per year from using them and capped annual contributions back then at $2,000.

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.
Lord of the Roths: How Tech Mogul Peter Thiel Turned a Retirement Account for the Middle Class Into a $5 Billion Tax-Free Piggy Bank

 

[Toddsterpatriot]

I do. However our stupid incompetent government shouldn’t allow this.

Why not? There are contribution and income limits.

Apparently not. He invested $2k and made $5 billion. All tax free. Yippee!!!

Apparently not.

There are, really.

He invested $2k

Like I said, contribution limits.

View attachment 507146

Read and get educated for once.


The late Sen. William Roth Jr., a Delaware Republican, pushed through a law establishing the Roth IRA in 1997 to allow “hard-working, middle-class Americans” to stow money away, tax-free, for retirement. The Clinton administration didn’t want to give a fat tax break to wealthy people who were likely to save anyway, so it blocked Americans making more than $110,000 ($160,000 for a couple) per year from using them and capped annual contributions back then at $2,000.

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.
Lord of the Roths: How Tech Mogul Peter Thiel Turned a Retirement Account for the Middle Class Into a $5 Billion Tax-Free Piggy Bank

Open a Roth with $2,000 or less.

Bastard!

Then use the proceeds, still inside the Roth, to make other investments.

I know, he was the first outside investor in Facebook.

 

[gipper]

I do. However our stupid incompetent government shouldn’t allow this.

Why not? There are contribution and income limits.

Apparently not. He invested $2k and made $5 billion. All tax free. Yippee!!!

Apparently not.

There are, really.

He invested $2k

Like I said, contribution limits.

View attachment 507146

Read and get educated for once.


The late Sen. William Roth Jr., a Delaware Republican, pushed through a law establishing the Roth IRA in 1997 to allow “hard-working, middle-class Americans” to stow money away, tax-free, for retirement. The Clinton administration didn’t want to give a fat tax break to wealthy people who were likely to save anyway, so it blocked Americans making more than $110,000 ($160,000 for a couple) per year from using them and capped annual contributions back then at $2,000.

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.
Lord of the Roths: How Tech Mogul Peter Thiel Turned a Retirement Account for the Middle Class Into a $5 Billion Tax-Free Piggy Bank

Open a Roth with $2,000 or less.

Bastard!

Then use the proceeds, still inside the Roth, to make other investments.

I know, he was the first outside investor in Facebook.

So how can we, everyday people, do something similar even if we're not the founder of the next billion-dollar company?

How the average investor can apply Thiel's strategy​

The short answer is, we can't. Not exactly, anyway. Most Americans who invest in Roth IRAs will never be able to buy shares in tiny, privately held startup companies for fractions of a penny, like Thiel did. The vast majority of us are shopping the open market and investing in ETFs, index funds, mutual funds, and individual, publicly traded companies.
I asked financial advisors how everyday people can build wealth in a Roth IRA, the account PayPal founder Peter Thiel used to turn $2,000 into $5 billion

So what if he got a sweetheart deal and avoided taxes on a massive profit, that 99.9% of Americans could never attain.

So thinks the dumb con.