Personal Finance

As multimillion dollar IRAs grow, lawmakers vow to curb abuse of these accounts

Palantir Technologies co-founder and chairman Peter Thiel at a Tokyo news conference on Nov. 18, 2019.

Kiyoshi Ota | Bloomberg | Getty Images

PayPal co-founder Peter Thiel did it. Now, new data shows other investors are doing it, too.

Figures released by the Joint Committee on Taxation finds that so-called mega individual retirement accounts, those with $5 million or more, are seeing big growth.

Thiel recently made headlines when reports surfaced that he owns a Roth IRA that had grown to $5 billion as of 2019, up from less than $2,000 in 1999.

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The growth of these giant IRA accounts prompted Senate Finance Committee Chair Ron Wyden, D-Ore., and House Ways and Means Chairman Richard Neal, D-Mass., to request figures on the number and size of these holdings.

Data for the 2019 tax year shows that 497 taxpayers have $25 million or more in aggregate IRA balances. The average aggregate account balance for those taxpayers was more than $150 million.

Moreover, almost 25,000 taxpayers had $5 million or more in IRA account balances.

The number of outsized IRA accounts has swelled since tax year 2011, when almost 8,000 taxpayers had IRA account balances of $5 million or more.

“It is shocking, but not surprising, to see how the use of mega-IRA accounts by mega-millionaires and billionaires has exploded,” Wyden said in a statement. “IRAs were designed to provide retirement security to middle-class families, not allow the super wealthy to avoid paying taxes.”

About 100 million Americans have no retirement plan benefits or savings in retirement accounts, Wyden said.

The Senate Finance committee will be looking to close those loopholes and make the tax code more fair, he said. The House Ways and Means Committee is also looking for ways to make sure the retirement accounts are no longer misused as a tax shelter for the richest Americans, Neal said.

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