Mitt Romney's IRA: what was his Rate of Return?

[ShibbOleth]

According to the Wall Street Journal, Mitt Romney’s IRA is valued at between $20.7 and $101.6 million USD. Romney was born in March of 1947 (baby boomer extraordinaire!) so is now 64 years old. IRAs only came into existence in 1974. For most of his life, IRAs have had a yearly cap of $2000, but now the limit is $5000, $6000 when your over 50 years old, which Mitt has been for a while now.

Individual retirement arrangements were introduced in 1974 with the enactment of the Employee Retirement Income Security Act (ERISA). Taxpayers could contribute up to $1,500 a year and reduce their taxable income by the amount of their contributions. Initially, ERISA restricted IRAs to workers who were not covered by a qualified employment-based retirement plan. In 1981, the Economic Recovery Tax Act (ERTA) allowed all taxpayers under the age of 70½ to contribute to an IRA, regardless of their coverage under a qualified plan. It also raised the maximum annual contribution to $2,000 and allowed participants to contribute $250 on behalf of a nonworking spouse. The Tax Reform Act of 1986 phased out the deduction for IRA contributions among higher-earning workers who are covered by an employment-based retirement plan. However, those earning above the amount that allowed deductible contributions could still make nondeductible contributions to their IRA. The maximum amount allowed as an IRA contribution was $1500 from 1975 to 1981, $2000 from 1982 to 2001, $3000 from 2002 to 2004, $4000 from 2004 to 2007, and $5000 from 2008 to 2010. Beginning in 2002, those over 50 could make an additional contribution called a “Catch-up Contribution.”[2]

Large balances are not unheard of, although lunch pail Joe is not going to see them

While the average and median IRA individual balance (in 2008) were approximately $70,000 and $20,000, higher balances are not rare – 6.3% of individuals had total balances of $250,000 or more (about 12.5 times the median),[16] and in rare cases, individuals own IRAs with very substantial balances, in some cases $100 million or above (about 5,000 times the median individual balance).[17] This typically occurs when founders of companies place shares in their own company in an IRA, and the share value subsequently rises substantially.[17]

Obviously, Romney has had some advantages that most don’t have. Don’t really care about that. Just want to know what his rate of return has been, assuming he has consistently maxed out contributions. I’d also like the name of his broker, but that’s for a different thread.

[Gus_Gusterson]

He got such a large balance by rolling other qualified accounts, such as 401K accounts, into the IRA. The limits on 401K contributions are much higher than those for IRAs (between employee contributions and company contributions you can currently add $50,000 to your 401K each year). He also probably held a lot of Bain stock in the 401K (or whatever kind of account he eventually rolled into the IRA).

[Ludovic]

A back of the hand calculation says that if he contributed the maximum and didn’t roll over anything he would have needed around a %24 rate of return annually, year after year.