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Andrew Henderson

Founder of Nomad Capitalist and the world’s most sought-after expert on global citizenship.

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Finance

How To Create a Roth IRA Like Peter Thiel

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Can you turn $2,000 into $1.5 million with a Roth IRA? That’s exactly what entrepreneur and the co-founder of PayPal, Peter Thiel did. 

The impressive gains of the Peter Thiel Roth IRA account elicit the question, could I achieve the same results with an initial retirement fund of a few thousand dollars?

Keep reading to find out how the billionaire entrepreneur achieved this impressive financial feat and what you can do to optimize your retirement accounts. 

Would you like to retire like a king? We will help you retire comfortably in the best location that offers the top real estate, residency, investments, and lifestyle opportunities with our holistic strategy.

Sign up for the Nomad Capitalist Weekly Rundown for actionable tips, the latest news for global citizens, and exclusive invites to our Town Halls and live events.

What is a Roth IRA?

Roth IRAs are retirement savings vehicles where you can save a limited amount of after-tax dollars. Unlike standard IRAs, contributions to a Roth account are not tax-deductible. Still, the primary advantage is that your contributions can grow tax-free and be taken out tax-free after age 59½, as long as your IRA account has been open for five years.

The basic idea is that you can take your Roth IRA out without paying tax on it again, allowing you to grow money tax-free. However, if you withdraw your money before the age of 59 ½, you are going to pay 10% in taxes. Although an IRA is arguably a powerful financial vehicle for middle-class families, in recent years, there have been changes to the law to restrict what wealthy individuals can do with their funds, and realistically there will be more to come. 

The contribution limit was increased to $6,500 and $7,500 for anyone over 50 in 2023. This amount changes periodically, so always check the most up-to-date figures. 

Infamously, Peter Thiel managed to increase the value of his Roth IRA retirement account from a mere $2,000 in 1999 to a staggering $5 billion by the end of 2019. Thanks to the tax benefits provided by an IRA, once he turns 59 ½, he should be able to withdraw his cash without paying any taxes.

Thiel’s secret lay in purchasing 1.7 million “founder’s shares” of PayPal in 1999 at $0.001 per share, totalling $1,700, acquiring a valuable investment opportunity not available to everyone. As the shares’ worth dramatically escalated, he reinvested the gains in his IRA. But how can individuals without the founder’s advantage replicate Thiel’s Roth IRA wealth?

Realistically with IRAs or other individual retirement accounts, you are not likely to achieve what Peter Thiel did, but if you are investing with competence, $6,500 is going to be worth a lot more by the time you are 65.

What is a Roth IRA

Unfortunately, you cannot contribute directly to a Roth IRA if you are a high-net-worth individual. There are alternatives that can help you bypass the IRA income limits: backdoor options, which involves initially investing in a more traditional IRA and after completing a Roth account conversion. No direct annual contributions are available for anyone earning $228,000 or more. 

Also, exceeding the annual IRA limits could lead to IRS penalties which can potentially negate any investment returns completely. There are a lot of specific laws and rules attached to IRAs, restricting what you can do with your money and potentially landing you with an unexpected tax bill. 

Let’s be realistic. It is doubtful that taxes will be lower than they are now by the time you reach retirement, especially with the US facing possible default on over $31 trillion in debt.

A US default will impact global stock market markets, including pensions. As the US accounts for a significant percentage of the value of global publicly traded stocks and markets, many people may have exposure to American shares in their pensions, even if they are unaware of it.

How To Retire With More Wealth

Would you like to return with more money, not less? As an entrepreneur and high net-worth individual, you have no doubt put a lot of work into creating a nest egg, so why retire with less money?

So, although you can attempt to copy Peter Thiel’s Roth IRA strategy, you’re not going to earn millions as he did through an IRA because that was a one-time confluence. 

Why limit yourself to an IRA or other government-restricted retirement plan when you could offshore and significantly reduce all your taxes or, even better, avail of tax free jurisdictions, maximizing retirement account security and your wealth and creating the most substantial retirement pot possible?

The power of compound interest is a compelling reminder to allow small amounts of money to accrue interest over time, leading to significant growth and wealth accumulation.

By applying our Nomad Capitalist Double a Penny for 30 days principles, you can reduce taxes and diversify wealth. Through our legal, holistic approach, we have helped over 1,500+ high-net-worth clients protect their wealth from high taxes and government overreach. 

If you want to keep more wealth, the best strategy is to go where you are treated best. Are you American and have an Italian or Irish ancestor? Are you entitled tocitizenship by descent

How To Retire With More Wealth

At Nomad Capitalist, we have helped clients obtain citizenship in 28+ countries, allowing them to take advantage of tax deals in Italy, Ireland, Singapore, and Dubai. 

To qualify for naturalization in Italy, for example, you can pay taxes annually at a flat tax rate of $100,000, and after ten years, you will get your Italian passport and access to Europe. 

Western governments have already shown a tendency to nationalize pensions and seize accounts, leaving savers vulnerable to government rule changes. Transferring your IRA offshore presents a viable strategy to yield better returns and defer taxes and is also an optimal asset protection measure against account seizures. 

When you become a Nomad Capitalist client, we work as the architects and general contractors of your holistic offshore strategy, helping you reduce your tax bills and diversify, protect your assets, and plan for the future.

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