Retirement at 23?!? According to a Wall Street Journal article, Bain Capital offered their employees a chance to co-invest in take over deals averaging 50% to 80% returns in their self-directed retirement accounts. American IRA, LLC CEO, Jim Hitt, says “This is one outstanding example of how tax-deferred and tax-free accounts can be used to build wealth.”
As the Washington Wire states in their article, it is very unusual for people to retire at the age of 23. Their article specifically addresses this by quoting a pension attorney, “I’ve never seen or drafted a plan permitting a distribution as early as 23,” said Charles M. Lax, a pension attorney at Maddin Hauser in Southfield, Mich. He said the Bain arrangement fits within IRS regulations, but “it’s inconsistent with the underlying premise of qualified retirement plans, which is that money’s supposed to be put away for your retirement. There aren’t too many people retiring at 23.”
Whether retiring at age 23 or 82, the main point here is that there is great potential within IRAs to grow wealth tax free and tax deferred. The IRS lists a short list of prohibited transactions and whatever is not on that list is allowed within self-directed IRAs…that leaves a wide variety of investments for retirement account holders to participate in.
Specifically, the Wall Street Journal article goes on to describe that, “during the Romney era at Bain Capital, the company was very successful. In one case, the equity value of a company grew 36-fold in 20 months! Some Bain employees saw an overall increase of over 583-fold over that same period on IRA money that was invested in a special class of that company without subtracting taxes”-yet another advantage of investing in an IRA.
Of course, in any case where there is potential for great gains, there is also potential for great risks. It is critical that anyone thinking about high risk investments in their IRA account does their ‘due diligence’. “When this kind of risk is involved”, Jim Hitt says, “make sure you check with professionals ‘before’ you commit funds to an investment. In most cases, those professionals are: attorney’s, CPA’s, financial advisors, and realtors. It is your money and you have to take steps to protect it.”
The Wall Street Journal article says these deals did pose a risk in which the employees could and sometimes did lose all the money they invested.
With gains like this, it is no wonder that Mitt Romney’s account grew to such a large account balance.
Jim Hitt closes in saying “While high gains like this are not the norm…they do happen. We have a client that grew his account from $6,800 to $293,000 in less than 7 years. When I look at my clients that have had the greatest success, what they seem to have in common is a drive to succeed. They are always looking for opportunity and always prospecting for those deals. The other thing they seem to have in common is their ability to see through the set-backs that sometimes happen and develop winning strategies to change those set-backs from duds to wins!”