In the US there are a variety of retirement plans that individuals can take advantage of. It’s a bit more complicated than Australia’s super system, but the basic principle is the same.
Stow money away now, set yourself up for retirement later.
Usually a boring affair, US retirement plans recently came into focus after it was revealed that divisive billionaire Peter Thiel, had amassed a tax-free retirement account (Roth IRA) worth $5 billion. This was according to confidential documents obtained by ProPublica.
While IRA’s were initially intended to be used by middle-class families to save for retirement, their use by the ultra wealthy - on a sometimes mind-boggling scale - has gained increasing scrutiny in recent times.
As Forbes explains, a Roth IRA ‘allows individuals to contribute already taxed dollars to an account, where investments grow untaxed and can be withdrawn tax-free’ at a certain point. That certain point occurs when the account holder turns 59 and-a-half.
How did we get here?
Thiel, who co-founded PayPal in the late 90s, stashed PayPal shares in his Roth account way back in 2001. He did so for cents on the dollar, literally filling his account with PayPal stock at 30 cents a share. PayPal - which was acquired by eBay in the early 2000s - last traded at $289 per share.
Reports also suggest he put Facebook stock - to which Thiel was one of the first key investors - in his Roth account.
Wherever you stand on the use of tax minimisation strategies, it’s hard to deny the impact people like Thiel have had on our modern society. PayPal, from scrappy fintech, has become ubiquitous with online payments. Not only that, but it’s irrevocably changed the way we interact with money and retail companies.
Thiel’s gargantuan retirement account also reiterates a point that we talk about a lot here Jaaims: the importance of taking the emotion out of the trading process. While Thiel was ‘locked’ out of his Roth for regulatory reasons, it remains true that his account snowballed because he let the market do the work for him.
Ultimately, helping investors have more time to do the things that matter to them is one of our core priorities at Jaaims.
That’s why you can connect your self-managed super fund SMSF to Jaaims and we analyse over 10million pieces of data daily to derive buy and sell recommendations across 1,000 global stocks. Better still, we even do the buying and selling, automatically opening and closing trades on your behalf.
SMSFs work best using our flagship product Smart Portfolio, only available to Professional subscribers, however you can also connect your SMSF to our Standard plan too. Both are available on annual subscription and both are tax deductible^.