William D. Cohan, Bloomberg: The Secret Behind Romney’s Magical IRA

[highplainsdem]

Interesting speculation on how Romney managed to accumulate between $21 million and $102 million in his IRA from his years at Bain, when the maximum contribution was set at $30,000 annually:

http://www.bloomberg.com/news/2012-07-15/the-secret-behind-romney-s-magical-ira.html

While there are limits to the amount that can be contributed tax-deferred to an IRA, there are no restrictions on the amount of money that the contributed capital can earn and can continue to earn, on a tax-deferred basis, even after the contributions have stopped. (The Internal Revenue Service will get its pound of flesh from Romney when he takes the money out of the IRA.) The only limit is the skill, or luck, of the IRA’s owner. If you are the Warren Buffett of IRA investors, it is conceivable that you could turn $450,000 into as much as $102 million -- an increase of 227 times -- but not very likely, especially as in the last decade or so, the stock market has been a roller coaster. Mere investing mortals would be lucky to still have $450,000 in the account. (The median American family has $42,500 in traditional IRAs, according to the Investment Company Institute.)

So how did Romney do it? Of course, we don’t know, but there have been several theories propagated to fill the considerable gap in knowledge left by Romney’s ongoing silence. Mark Maremont, a Pulitzer Prize-winning reporter at the Wall Street Journal (and a former classmate of mine at journalism school), has suggested that -- perfectly legally -- Romney contributed to his IRA using the low-basis, low-value stock he received as a partner at Bain Capital in the various buyouts the firm did while Romney was there.

-snip-

Of course, not every deal Bain did worked out. But let’s say Romney was prescient and put into this hypothetical IRA only the stock of the buyout companies that did well, returning to investors a whopping 10 times their money. (This is very rare but conceivable.) Even so, that would turn Romney’s $450,000 into $4.5 million. If the money was also compounded and reinvested over the years and became, say, $10 million, that would still leave another $11 million to $92 million of unexplained value sitting in the presumptive Republican Party presidential nominee’s IRA.

-snip-

The other possibility, Kleinbard suggested, was not dissimilar to what Maremont theorized: that Romney contributed limited-partnership interests in Bain’s buyouts to his IRA. What was “quite troubling” to Kleinbard is that he suspected Romney may have contributed these interests to his IRA at a fraction of their market value -- “pennies on the dollar” -- and well below what he might have charged you or me. When the buyouts became successful, Kleinbard proposed, the pennies on the dollar were suddenly worth real dollars.

-snip-

[Sedona]

1. Off to the greatest page!

nt

[CANDO]

2. Remember Hillary's cattle futures investment?

That was nothing compared to this bonanza!

[reformist2]

3. Short answer - he's a crook.

[danbr96]

4. Rollovers anyone?

I know this may be complicated and complex. Though it seems the author of article and all those confused by the magical math may have failed to consider a rollover into Romney's SEP IRA. Rollover moneys provide an additional source of funds beyond annual contribution limits and could have been invested in the penny on dollar stocks and bolster assets in retirement account.

Here is a link to a website which summarizes the rollover rules from accounts to accounts.

http://bestirarescue.com/ira-rollover-chart-rules.html

Transfers from Traditional IRA, Simple IRA, Qualified plan, are allowed.

Where might a rollover come from? Well money Romney may have set aside from his earnings prior to 1984 during his working years.

[lindysalsagal]

5. This is enough to piss off voters. I hope it gets legs. n/t.

[n2doc]

6. I'm willing to bet the IRS never sees a dime from Mitt's IRA if he wins

Either he will leave it to his kids after eliminating the 'death tax', or he will push for some loophole that allows tax free withdrawals from IRA's, above a certain size.

Just know that the average person with 50K in their IRA will still be fully taxed...