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https :// www . fa-mag . com / subscribe / newsletters . html whose use of the vehicle was publicized in a 2021 article by the news site ProPublica . ( The story was called “ Lord of the Roths : How Tech Mogul Peter Thiel Turned a Retirement Account for the Middle Class Into a $ 5 Billion Tax-Free Piggy Bank .”) In 1999 , Thiel had an income of $ 73,263 , a figure beneath that year ’ s Roth income threshold of $ 110,000 , the article said . He contributed $ 2,000 to a Roth IRA , which was used to purchase PayPal shares . By 2003 , when PayPal was sold to eBay , Thiel ’ s Roth PayPal shares were worth $ 28.5 million . By 2019 , his Roth IRA had grown to approximately $ 5 billion , Pro- Publica said .

In reaction to the revelations , the Ways and Means Committee of the U . S . House of Representatives drafted proposed legislation in 2022 aiming to prohibit wealthy individuals with retirement accounts exceeding $ 10 million from contributing extra savings . ( The bill would also have introduced new annual minimum distribution requirements .) Roth strategies such as the backdoor Roth and the mega Roth conversions were to be limited or eliminated . Although this legislation was never enacted as law , it serves as a warning that these strategies could be modified or eliminated in the future .

Currently , the Roth conversion , the backdoor Roth and the mega Roth strategies remain effective techniques for people whose income exceeds the limits for direct Roth contributions — and who want to diversify their retirement savings . The strategies are ideal for investors expecting higher taxes in retirement or those wanting to leave tax-free inheritances . However , as the Peter Thiel story and the resulting political backlash have shown , there is always a concern that future tax law changes could crimp the benefits of Roth IRAs . But proactive retirement planning now can help both retirees and their heirs reap significant benefits in the future .

DANIEL F . RAHILL , CPA / PFS , JD , LL . M ., CGMA is a wealth strategist at Wintrust Wealth Management . He is also a former chair of the Illinois CPA Society Board of Directors and is a current officer and board member of the American Academy of Attorney-CPAs .

26 | FINANCIAL ADVISOR MAGAZINE | SEPTEMBER 2024 WWW . FA-MAG . COM