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August 17, 2012
During Romney’s time at Bain Capital LLC, the company used a SEP-IRA that had a maximum contribution limit of about $30,000 per year. Assuming Romney maxed out these tax-deferred contributions, he would have invested approximately $450,000 in his individual retirement account during his tenure at Bain. BUT, he may have up to 227 times that amount in his IRA! The baffling mystery about Mitt Romney’s significant wealth is how he was able to build up between $21 million and $102 million in his IRA during the 15 years he was at Bain Capital.
So how did he do it? Of course, we don’t know, but there are several theories out there that attempt to make sense of it all.
One theory is that Romney contributed to his IRA using the low-basis, low-value stock he received as a partner at Bain Capital in the different buyouts the company did while he was there. Another theory is that Romney contributed limited-partnership interests to his IRA in Bain’s buyouts, and quite possibly only at a fraction of their market value.
While there are limitations concerning the amount of money that can be contributed tax-deferred to an IRA, there are no restrictions on the amount that the contributed funds can earn, and can continue to earn, on a tax-deferred basis, even after the contributions have stopped. Therefore, in the future when Romney withdraws funds from his IRA, the IRS will get a hefty sum of money in taxes. Too bad his money isn’t invested in a Roth IRA!