Subject: Mitt's IRA (from last issue)
Yo, buddy Bart!
Regarding Russ’ comments below, I think I have something useful to add, mainly that there are annual limits to
contributions to 401(k)s and, I’m pretty sure, to ESOPs as well. The current (2012) contribution limit on 401(k)s
is 50 percent of one’s wages up to $17K per year, except that (starting the year one turns 50 years old) one can
start making “catch-up” contributions up to another $5,500 per year—stuffing in a ‘little extra’ as retirement gets closer.
Those limits have been lower in the past and are roughly increased over time due to inflation. [With an IRA, one can
similarly make “catch-up” contributions up to another $1,000 per year ($6K total).]
there are also additional limits for so-called “highly compensated
employees (HCEs)”, which I’d guarantee
Shirley among your dozens of readers you
have some HR professionals who could elaborate on and/or correct what
wouldn’t necessarily make it impossible to get $100M into an IRA, but
Now, that said, I can conceive of a way it could perhaps be done.
a CEO of a company…call it Bain. When you write up your 401(k) or
deferred compensation plan,
just so happens that you’re also the CEO of Cain. And on
your Cain company stock, you can declare dividends
just thought of something else—it wouldn’t have to be a stock; it could
be a bond (a fancy name for a loan).
As I was thinking this idea through, this analogy came to mind. Maybe it will help.
want to park a blimp ($100M) in your garage (IRA)…hey, it’s too
big! Especially when the IRS says you
Not bad work, if you can get it!
Well, that’s all I can think of. I’ll let you and your skilled readers have at it!
A www.bartcop.com pillar
Subject: Mitt's IRA
I had thought the problem's with Mitt Romney's IRA were gone, but apparently they are
still bothering some people, who say, "How can you possibly get $100M in an IRA if the
maximum amount you can contribute is $5k/year?" Well, if you include the "if" phrase,
you can't. But that's not the only way to get an IRA.
For example, I worked at a company that had an ESOP (employee stock ownership program)
as its main retirement plan. Around 10% of my salary was contributed every year to invest in
company stock. When I left the company, that stock was sold and rolled over into an IRA.
For me--a middle-class working grunt--that meant that, after seven years of employment,
I had a $40k rollover into my IRA, in addition to the $5k I was allowed to contribute every year.
I was also allowed to roll over my 401k plan, worth over $60k.
Let's scale here. Mitt made at least 200x what I made every year. If he had the ESOP and
the 401k, he would already have had $20M in seven years. Now add that he was at Bain for
longer that that, and that an ESOP grows with the value of the company stock. I see no reason
why he wouldn't have had $100M in combined ESOP and 401k -- and then rolled them into
an IRA when he left Bain.