Tax-Free Billions: Step by Step How Peter Thiel Has $5B in His Roth IRA (2024)

Investing

Few stories have captivated the public’s imagination quite like that ofPeter Thiel’s RothIRA. Here isthe journey from amodest contribution of$1,700 to+$5 billion, step bystep.

The Peter Thiel IRA Strategy: How $1,700 Became $5B

In1999, before hebecame abillionaire, PayPal founder Peter Thiel had aRoth IRA worth $1,700.

Utilizing the proceeds from his substantial PayPal windfall and investment inFacebook startup shares, Thiel channeled millions into investments inother startups within Silicon Valley.

Heeven directed funds into his own hedge fund, asdetailed inamemo from his financial assistant into his RothIRA.

Step 1: Initiate aRoth Account

The process begins byopening aRoth IRA account. Even arelatively small amount isokay.

The next step istoseek out anopportunity toacquire anasset, orastake inastartup company, that isexpected toexperience significant value growth inthe future.

This step iscrucial because the goal istoinvest inacompany whose shares are valued atavery low cost atthe time ofacquisition.

Aswith most startups, PayPal provided its key executives with modest initial salaries and substantial stockgrants. Per Thiel’s IRS records, his earnings for that particular year amounted to$73,263.

Investors can use the money intheir Roth IRA tobuy low-value shares inaprivate company before itgets big ($0.00001). Some founders have used this strategy tobuy shares intheir own companies— with dirt-cheap prices set bythe companies themselves.

Why dothis?

Purchasing shares inastartup ataprice per share that isextremely low, often just afraction ofacent, allows them toacquire many shares with arelatively small investment for the greatest possible return oninvestment.

Sell your shares and keep all the profits tax-free inaRoth IRA account. The Peter Thiel IRA strategy acquired the ultimate edge any investor could have used but was astrategy that eluded almost all other investors:

Turning his personal investment bank into aRoth IRA, 100% shielded from taxation.

This newfound advantage allowed him toutilize the funds within his Roth IRA account tobuy and sell nearly any investment hedesired.

Step 4: Reinvest Profits

Investors can use the profits and gains toinvest innew assets orsecurities within the Roth IRA.

Example: Ifyou have stocks that have appreciated invalue, you can sell them within the Roth IRA and use the proceeds topurchase new stocks orother eligible assets.

• This strategy takes advantage ofthe Roth IRA’s unique tax treatment.

• Itopens upopportunities for individuals, including wealthy investors like hedge fund managers, industrialists, and heirs, totake advantage ofthe tax benefits offered byRothIRAs.

Step 5: Wait Until Age 59 ½

Asthe startup grows invalue over time, any profits generated from the appreciated stock within the Roth IRA remain shielded from taxes indefinitely.

** Aslong asaRoth IRA remains untouched until the investor reaches the age of59 and ahalf (the age atwhich qualified withdrawals can bemade without penalty), the earnings continue togrow tax-free.

The Peter Thiel IRA Strategyvs. Warren Buffet

Warren Buffet isuniversally recognized asone ofthe best investorsever. But, not even Buffet can’t hold acandle tothe Peter Thiel IRA strategy.

Warren Buffet’s Berkshire Hathaway

Averaged a20% annual return over 55 years.

Total Return: 5,828%

The Peter Thiel IRA Strategy

Averaged anannual return of97% over 24years.

Total Return: 294,117,600%

The Peter Thiel IRA strategy seized the opportunity toacquire shares instartups atremarkably economicalprices. Thiel’s pivotal contribution of$500,000 marked the initial significant external cash infusion into Facebook.

1. Thiel’s Roth IRA isthe largest account ofits kind

2. Won’t have topay asingle penny intax onthis account

3. Can start tocollect tax-free only six years from now

Interestingly, these very Facebook shares found their way—predictably—into Thiel’s Roth IRA, afact later unveiled byaFacebook attorney through aletter submitted inafederal court.

This strategic move ensured the Peter Thiel IRA strategy wouldn’t beliable for taxes onhis early investment inthe social media giant.

Atthe time, Senator Roth assured that his novel IRA concept would,stating:

“Offer assistance todiligent, middle-class American workers.”

How would Senator Roth feel about Peter Thiel’s IRA portfolio today?

Transforming the Traditional IRA: The Roth Conversion

About adecade after the creation ofthe Roth, changes introduced abackdoor method for investors toconvert atraditional retirement account into aRoth IRA bypaying aone-time tax.

This conversion option was introduced through the Tax Increase Prevention and Reconciliation Act of2005 (TIPRA) and became effective in2010.

The newfound flexibility significantly impacted retirement planning byallowing individuals toshift their retirement savings from atax-deferred environment toatax-freeone.

Itallowed any American totake money inless favorable traditional retirement accounts and, after paying aone-time tax, toshift them toaRoth where their money could grow untaxed, similar tohaving your own Bermuda-style tax haven right here inthe U.S.

This process was asignificant departure from previous restrictions that limited Roth conversions toindividuals with lower incomelevels.

Before the change:

• Individuals were limited inconverting their traditional IRAs toRoth IRAs.

• Itexpanded retirement planning options and gave individuals more flexibility inmanaging their retirement savings.

• Italso changed the tax code and allowed individuals toconvert their traditional IRAs into Roth IRAs.

• Removed the income limitation previously preventing high-income earners from converting their traditional IRAs into Roth IRAs.

• Only individuals with amodified adjusted gross income (MAGI) of$100,000 orless were eligible toconvert.

Now, regardless ofincome, anyone could convert their traditional IRAs into aRoth.

NOTE: When anindividual converts atraditional IRA toaRoth IRA, they are required topay income tax onthe converted amount inthe year ofconversion. This isbecause the funds inthe traditional IRA were contributed pre-tax, and the government wants tocollect the tax revenue itwould have received uponwithdrawal.

The decision toconvert toaRoth IRA depends onseveral factors:

• Future tax rates

• The individual’s financial situation

• Retirement goals

So, what does this mean for you?

Read out recent article about Backdoor Roth IRAs here.

Zero ToOne

Inhis book “Zero toOne,” Thiel argues that fortunes are built not byluck orunfair advantage but bydiscerning investors and founders who are more courageous than their peers, leaders who zig when the crowd zags.

Thiel devotes anentire chapter tothe importance ofkeeping secrets, writing that “every great business isbuilt around asecret that’s hidden from the outside.”

By2019, Thiel’s holdings were sovast and diverse that his +$5 billion was spread across 96 sub-accounts inside hisRoth. These retirement account strategies all relied onpublicly traded investments and strategy available toall taxpayers…

You won’t make $5B dollars like Thiel, but could you make $5M? Absolutely!

Compound Interest: Humanity’s Greatest Shortcoming

Investing for retirement isajourney that requires careful planning, patience, and agood understanding ofthe dynamics ofcompound interest.

Understanding Compound Interest

One question often arises ininvestors' minds: How often does money typically double inanIRA?

Simple Example: Would you rather have $5M all atonce orapenny that doubles daily for amonth?

Unlike simple interest, which iscalculated solely onthe principal amount, compound interest also takes into account the accumulated interest.

• Asyour interest earns interest, your account experiences exponential growth

• This phenomenon can lead tosignificant financial gains over the long term

Facebook Stock isFor Insiders: ARoth Bitcoin IRA isFor Everyone

When shaping arobust retirement portfolio, including Bitcoin might initially raiseeyebrows. Often linked toits fair share ofvolatility and perceived risk, Bitcoin presents anarray ofreasons why itshould beconsidered aprudent long-term investment for yourIRA.

Tax-Advantaged Growth

Diversifying your IRA with assets that promise substantial returns, like Bitcoin, can beashrewdmove. The inherent advantage lies inthe potential for tax-deferred oreven tax-free growth, depending onyour IRA type— whether Traditional orRoth.

BeLike Thiel

While you likely won’t beable toturn your Roth IRA account into a$5B;a$5M Roth Bitcoin IRA account, perhaps. Bitcoin can provide you financial security using the Peter Thiel IRA strategy.

Run Your Numbers

Tosee what may happen toyour returns after adding Bitcoin toyour retirementportfolio… Run your own numbers with our open-source Bitcoin Retirement Calculator.

This ispart ofanew initiative called Swan Research.

Expand Past 60/40

The conventional retirement portfolio often follows a60/40 allocation between stocks and bonds, astrategy designed tobalance risk andreward. Bitcoin, however, takes diversification tothe next level.

Unlike traditional assets, Bitcoin exhibits alower correlation, making itavaluable addition toyourportfolio. This can ultimately enhance your overall risk-adjusted returns, offering anedge inunpredictable marketconditions.

Hedge Against Inflation and the Legacy Banking System

The insidious effects ofinflation onthe purchasing power ofyour hard-earned money over time are undeniable.

Bitcoin isapotential safeguard against the erosion ofvalue caused byunrestrained monetary expansion from newly issued banking credit and government deficit spending into the total supply.

With afixed maximum supply of21 million coins, Bitcoin’s scarcity sets itapart from fiat currencies susceptible todevaluation and even physical gold.

InJune 2022, authorities inUganda revealed asignificant find ofaround 31 million metric tonnes ofgold ore within thenation. This discovery could yield upto320,158 metric tonnes ofpurified gold, with anapproximate valuation of$12trillion.

This single new discovery represents more than the entire amount ofgold above ground and accounted for intotalsupply. Asthis gold isrecovered, itwill begin tosignificantly dilute the scarcity properties ofthe metal.

However, noone will ever find asingle additional satoshi ofnewBitcoin. New massive gold deposits like that recently discovered inUganda will continue, though.Predictive models indicate that the final Bitcoin will bemined by2140, over acentury away.

Incontrast, NASA, the U.S. government’s space research agency, has devised astrategy tocapture anasteroid valued at$10 quintillion, primarily due toits abundant precious metals like gold.

NASA’s timeline suggests that the asteroid retrieval mission could occur inlate 2029 orearly 2030, assuming the mission issuccessful.

Amplified Expected Returns

Contrast the conventional 7% expected annual returns ofastandard 60/40 portfolio with the impressive track record ofBitcoin.

Above, wementioned that the Peter Thiel IRA strategy has netted anaverage return of97%. Since its inception in2009, Bitcoin’s average annual price increase has exceeded 100%, showcasing its potential for monumental growth.

While it’s prudent not toput all your eggs inone basket, even asmall allocation into aBitcoin IRA can significantly bolster your retirementprospects.

How toRoll over Your Current IRA into aSwan Bitcoin Roth IRA

Arollover isamovement from a401k, 403b, orsimilar retirement account toaRoth IRA usually coordinated primarily bythe customer and their existing retirementcustodian.

Typically funds are sent bywire transfer, which isthe recommendedmethod. Funds can also besent viacheque. However, this issignificantly slower than sending funds via wiretransfer.

Before completing arollover, you must liquidate your other retirement account tocash. You can initiate aRollover via your current custodian.

Can Iroll over part ofmy401k, 403b, orsimilar retirement account into Swan BitcoinIRA?

• Tosee your Swan Bitcoin IRA Rollover instructions, click on"Rollovers" onthe Navigator bar ofyour Swan IRA account.

• While the IRS allows partial rollovers, some employer-sponsored plans may not permitthem.

• Contact your plan administrator toconfirm whether your plan allows partialrollovers.

What isthe pricing ofthe Swan BitcoinIRA?

A0.99% transaction fee taken out when the funds are moved over.

Interested inspeaking toanIRA expert?

ASwan Bitcoin IRA compares very well against other Bitcoin investment sites.

Ifyou are interested inatax-free Coinbase alternative orhave any other questions, please email IRA@swanbitcoin.com. Book acall with arep today and get apersonalized guide onhow tomaximize your retirement portfolio with Bitcoin.

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