Palantir, Paypal Co-Founder Peter Thiel's $5B Retirement Piggy Bank Faces Lawmakers' Hammer

Palantir Technologies Inc PLTR and Paypal Holdings Inc PYPL co-founder Peter Thiel could reportedly be forced to withdraw billions from his Roth IRA account should the House pass a piece of tax legislation that has cleared a key Committee.

What Happened: Thiel could be forced to withdraw all but $20 million from his Roth IRA after House Democrats revealed a tax package that would force distribution of individual retirement accounts, 401 (k) plans and other retirement nest eggs is above $10 million, CNBC reported.

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The Palantir co-founder would owe income tax on the growth of his investments, as per accountant and IRA expert Ed Slott. 

As per the proposed law, shareholders must withdraw 50% of accounts valued at more than $10 million, while larger accounts over $20 million must draw down 100%, reported CNBC.

Single taxpayers with less than $400,000 of income and married couples with less than $450,000 are reportedly exempt from the proposed rules.

Robert Keebler, an accountant and estate planner, said that if Thiel was “really clever and can get his [adjusted gross income] below the threshold he will avoid this new rule altogether.”

Why It Matters: In June, ProPublica reported that Thiel’s Roth IRA account had grown from under $2,000 to $5 billion in 2019.

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Roth IRA account contributions are taxed upfront, but investment earnings are tax-free, which means if Thiel withdraws his funds after turning 59 ½ years old, he would owe no taxes.

As per ProRepublica’s investigations, others that have huge amounts stashed in Roth IRA accounts include Berkshire Hathaway Inc (NYSE: BRK-A) (NYSE: BRK-B) CEO Warren Buffett and his deputy Ted Weschler, and Alden Global Capital fund manager Randall Smith. 

Weschler said in a statement, “Although I have been an enormous beneficiary of the IRA mechanism, I personally do not feel the tax shield afforded me by my IRA is necessarily good tax policy,” as per ProRepublica.

As per the Bloomberg Billionaire’s Index, Peter Thiel’s net worth stood at $7.54 billion, as of press time. He is placed at No. 353 on the list and has seen his wealth increase by $900 million so far this year.

Berkeley Professor and former Secretary of Labor Robert Reich said on Twitter Sunday that “Billionaires are not the answer,” pointing out that Tesla Inc TSLA CEO Elon Musk paid $0 in federal income tax in 2018.

During the peak of the COVID-19 pandemic in mid-March last year, billionaires in the United States added a trillion dollars to their wealth.

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Photo: Courtesy of Dan Taylor via Wikimedia