The Curious Case of Mitt Romney and the (up to) $100 Million IRA

Mitt RomneyContradicting what I wrote in my previous post about IRAs being irrelevant to upper-middle class and wealthy people, we have the curious case of Mitt Romney, who reported in his 2010 tax returns an IRA worth between $20 million and $100 million.  At that level of assets, I must acknowledge he’s the exception to my rule of IRA irrelevancy for high income people.

An IRA at $20 million to $100 million has gone from humble and homely to something quite sexy and amazing.  In other words – as my wife would say – Mitt Romney’s IRA is Bradley Cooper in Silver Linings Playbook.

At first glance you may be tempted to shrug your shoulders at the size of Romney’s IRA.  After all, since he’s a wealthy and successful businessman, isn’t that kind of what you’d expect?  Ummmmmm, no.

It’s so incredibly unusual to amass that kind of wealth inside an IRA that I’m kind of hoping to crowd-source the answer to this mystery.  I mean, I can speculate below, and I will, but I would really love for someone more knowledgeable than me to guide me in the process.[1]

Here’s why it’s hard: throughout most of Romney’s working life, the individual IRA contribution limits were $1,500 to $2,000.  The limits jumped to $3,000, $4,000, and $5,000 in 2002, 2005 and 2008 respectively, but all of that is too recent to benefit from the real power of compound interest to get up above $20 million.

I am as aware of the incredible power of compound interest to grow humble seeds of capital into mighty oak trees as anyone, but the investment math involved here is not, let’s say, frequently observed.

A simple, but probably wrong, assumption

Assuming Romney was eligible to make the maximum IRA contributions from 1974 onward[2], and did so, he was eligible to contribute a total of $94,500 over the years 1974 to 2010, to his personal IRA.[3]

By applying a relentless 24.5% compounding return to each and every theoretical maximum Mitt Romney contribution from 1974 to 2010, we can in fact arrive at a total summed value of $21.5 Million.


1/1/1974 $1,500  $4,001,178 36 26.8
1/1/1975 $1,500  $3,213,798 35 27.8
1/1/1976 $1,500  $2,581,364 34 28.8
1/1/1977 $1,500  $2,073,385 33 29.8
1/1/1978 $1,500  $1,665,369 32 30.8
1/1/1979 $1,500  $1,337,646 31 31.8
1/1/1980 $1,500  $1,074,414 30 32.8
1/1/1981 $1,500  $862,983 29 33.8
1/1/1982 $2,000  $924,212 28 34.8
1/1/1983 $2,000  $742,339 27 35.8
1/1/1984 $2,000  $596,257 26 36.8
1/1/1985 $2,000  $478,921 25 37.8
1/1/1986 $2,000  $384,675 24 38.8
1/1/1987 $2,000  $308,976 23 39.8
1/1/1988 $2,000  $248,174 22 40.8
1/1/1989 $2,000  $199,336 21 41.8
1/1/1990 $2,000  $160,109 20 42.8
1/1/1991 $2,000  $128,602 19 43.8
1/1/1992 $2,000  $103,295 18 44.8
1/1/1993 $2,000  $82,968 17 45.8
1/1/1994 $2,000  $66,641 16 46.8
1/1/1995 $2,000  $53,527 15 47.8
1/1/1996 $2,000  $42,993 14 48.8
1/1/1997 $2,000  $34,533 13 49.8
1/1/1998 $2,000  $27,737 12 50.8
1/1/1999 $2,000  $22,279 11 51.8
1/1/2000 $2,000  $17,895 10 52.8
1/1/2001 $2,000  $14,373 9 53.8
1/1/2002 $3,000  $17,317 8 54.8
1/1/2003 $3,500  $16,228 7 55.8
1/1/2004 $3,500  $13,034 6 56.8
1/1/2005 $4,500  $13,460 5 57.8
1/1/2006 $5,000  $12,013 4 58.8
1/1/2007 $5,000  $9,649 3 59.8
1/1/2008 $6,000  $9,300 2 60.8
1/1/2009 $6,000  $7,470 1 61.8
1/1/2010 $6,000  $6,000 0 62.8
SUM TOTAL $94,500 $21,552,451


This is mathematically possible, but highly improbable in the real investing world.  Not every investment goes up in a rocky, volatile risky world.  And nobody relentlessly returns 24.5%, for 36 years, in the real world.  (Except, of course, Stephen A Cohen.)  Or 30.7%, the amount rate of return Romney would need to achieve a total IRA over $100 million.

A slightly more realistic picture of how Romney grew his IRA

Under a more realistic set of circumstances we would assume that Romney rolled over his employer-sponsored plan like the Bain Capital SEP-IRA, which allowed for average contributions of $30,000 per year.  If he regularly socked away $30,000 in his primary Bain Capital years, 1984 to 1999, he’d still have needed to average a 21% return over those 15 years to get above the minimum $20 million threshold, or over a 29% return, each and every year, to reach $100 million.

These returns are also extraordinary, but because they may have happened over a 15-year period rather than 36 year period, they become a tad more believable.  The years 1984 to 1999 also coincided with an incredible bull-market run in public equity markets, which while not directly related to the private markets in which Bain Capital specialized, would tend to buoy Bain Capital’s access to liquidity, leverage, investor confidence, and exit strategies over the 15 years.

Most importantly for the IRA discussion, however, is the key point that a SEP-IRA really isn’t the humble, homely individual IRA we started out discussing.  When you can contribute $30,000 per year it’s not a fair comparison to the traditional personal IRA, but rather more akin to a super-charged 401K plan.

So seemingly-homely Bradley Cooper, even when running in a black hefty trash bag and trying his best to look like the average, just out of psych lockup, slumpy, bipolar dude on lithium, was really sexy Bradley Cooper all along. (Again, the heavy editorial hand of my wife.)

But still, how could Romney earn 21 to 29% year after year after year for 15 years?

Ok fine, I’ll contribute to the speculation, which has to remain speculation because Romney never publicly explained his IRA success.

The Wall Street Journal offered a plausible explanation of Romney’s IRA success last year.

The Wall Street Journal article explains it the following way:

Bain Capital employees including Romney (as then CEO) apparently co-invested their SEP-IRAs alongside other Bain Capital funds, and probably received different classes of shares than did traditional Bain Capital investors.  The different classes of shares, the speculation goes, could have systematically low values because they represented junior, or riskier, pieces of Bain Capital investments.

These systematically low-priced share-classes of the Bain Capital co-investments frequently popped in value on successful investments.  When the investments worked, as they often did, these initially low-valued, risky shares offered much higher returns that we would normally find in public markets.

It sounds plausible, risky, legal, and not particularly replicable for ordinary investors.

But yes, under certain circumstances, the personal IRA can be a real cool investment vehicle.

Please see related posts on the IRA:

The Humble IRA

IRAs don’t matter to high income people

The magical Roth IRA and inter-generational wealth transfer

The 2012 IRA Contribution Infographic

The DIY Movement and the IRA

Angel Investing and the IRA


[1] I am, like all non-wealthy Americans, just a temporarily embarrassed millionaire.  If some helpful reader would share the Romney methods we would all be grateful, especially me.

[2] This assumption is unlikely to be true, since he was in a combined Harvard Law School and Harvard Business School program in 1974 and 1975 and might not have had any, or sufficient, income in those years as a student.  But it is possible, so I’ll give him the benefit of the doubt.

[3] This $94,500 includes the ‘catch-up’ amounts he became eligible for, starting in 2002, for being over age 50.

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15 Replies to “The Curious Case of Mitt Romney and the (up to) $100 Million IRA”

  1. He could have a self-directed IRA that allows him to invest funds in pretty much anything he wants to invest in (real estate, private companies, futures, you name it – oh, and private equity deals are fair game). A few deals where the shareholders make a windfall and his ROI could be in the hundreds to possibly thousand percent. The investor creates an entity – such as a REIT, LLC, S, or C..take your pick. The IRA invests in the entity. The assets company has an interest in a few high potential deals, which makes a bunch of transaction money, carried interest, dividend, and the asset company pays a nice return to the investor (which includes or is solely funded by) the self-directed IRA. All legal (but this isn’t legal advice).

    1. Yes, the self-directed IRA is key. I’m going to write about it this week, as my “DIY Movement and the IRA” post. Thanks for commenting.

  2. Knowing Mitt Romney, he could have accumulated his IRA wealth a number of different ways.

    It doesn’t really matter; he is still an elitist schmuck.

  3. Cutting-edge accounting tricks. No guilt about stiffing the US Treasury and by extension, the rest of us. Taxes are for little people.
    Thank god he lost.

  4. The big popular thing for tax exempt accounts in the 70-90’s were the KEOGHs. Plus he was a public servant so 457B + 401K Employer & Employee Contribution. I know some people in elected office that do a variation of these that follow with their public employment, law practices, and other businesses. For Romney – just addspecial shares of investment stock instead of cash from his LBO/PE Funds contribution as a way to supercharge it.

    Numbers as of today—
    51,000 – For self employed, you can put 51K or 25% of income into a KEOGH annually. Keogh contribution are independent of 401K limits.
    17,000 – For years a public servant – Max 457B employee contributions, as Governor – he might have been entitled to Employer Contribution to 51,000 limit. 457B are independent of 401K limits + Add in Governor’s Pension Credit that he withdrew from the Retirment System – likely small change.
    17,000 – For 401k employee contribution – One of his subsidiaries.
    51,000 – For 401k employer contribution -Same above subsidiary. Number may be reduced if other employer contributed to other 401k, 457b – adding to 51,000 employer limit.
    6,000- IRA contribution based on age.
    Total – Up to $142,000 a yr as of today.
    Plus everything rollovered into same account= Kaching

  5. I did some quick math the other day.

    He was at Bain Capital for ten years, 1984-1994.

    One of the deals Bain did, with Experian, tripled the value of the stock in 7 weeks alone.

    If Bain set up a SEP-IRA for each employee, and fully funded it at the $30,000 limit at the time (does anyone know the limits from 1984-1994?), and we guess the initial contribution tripled, from $30k to $90k, we start with $90k after one year. I’ve read that the value of their investments went up 80% annually during Romney’s time there, so consider that the annual compounding percentage.

    If we start with $90,000 in 1984, add $30k each year, and compound it at 80% over the following 10 years until Romeny leaves, we end up with $56 million, which would easily fall into the $20 million to $100 million category.

    From 1994-2011, even at just 3% annual growth, that $56 million is going to grow over $92 million. If he had 4% growth, he is over $100 million.

    The only extraordinary thing here is the 80% interest each year, but if you’re re-investing your principal and earnings in every new deal, it isn’t difficult to see that happening.

  6. All the young people at PE/VC funds max out their Roth IRA contributions with the highest risk investments in the firm. If he put $2500/year into Domino’s or Staples when they were young Bain Cap-backed start-ups, its easy to see where he got that money.

  7. It’s pretty simple — when he founded Bain Capital, he bought part of his initial stake through a self-directed IRA. The original capitalized value of Bain Capital could have been as low as $5,000-$10,000, and he started off owning nearly 100% of it. He could thus have had a 50% ownership stake put into his IRA. As Bain Capital became increasingly successful, the value of his original $X,000 IRA investment increased to $100 million.

    The same option is still available to anyone starting their own business through a self-directed IRA.

  8. Lots of thoughts of how he could possibly make that much or contribute that much into an ira, me, im limited t0 about 14k year. But I smell a rat in this. No one can make that amount of money or contribute that amount into an ira without,,,ah,,lets call it,,, help.. Where have all the good investigators gone.

  9. I’ll explain a very common way that this can happen, which was later confirmed by appendix 7 of the report on this very issue from the GAO in 2014 (available at Here they are:

    * Non-publicly traded shares: It’s popular to think that the big money in stocks is in buying an ipo and watching it zoom upward, but the real money is in buying privately-traded companies before they go public when they can be had for tiny prices per share (sub-$1 is extremely common). After these shares go public, the owners of private shares experience geometric growth in their investments.

    * Profits Interests – this one is huge. Partnerships & LLC’s can be structured so that there are 2 classes of ownership, where the Class “A” of ownership receives the entire first (for example) 8% of profit, and the Class “B” receives everything above 8%. From the vantage point of accounting, Class B shares have extremely low value because it’s entirely possible that the profits will never exceed 8%. As a result, Class B shares can be purchased (if you’re well connected) at *EXTREMELY* low prices, and in the event that the partnership achieves a profit of above 8% even one time, it’s likely that the Class B share owners will receive a return of all of their principal and more. If an 8% profit happens more than in a single year, the returns for Class B become stratospherically high.

    We don’t really know what strategy Romney used, but I’d be shocked if it wasn’t a version of one or both of these strategies because both of those strategies are very common in the VC world where Romney comes from, and because both of those strategies were featured as explanations in the GAO report for how self-directed IRA’s can become very large.

    1. Bryan, thank you. That seems very likely how it works. And its a pretty good case for running one’s own self-directed IRA if you’ve got deal-flow like Romney and VC folks have/had.

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I founded Bankers Anonymous because, as a recovering banker, I believe that the gap between the financial world as I know it and the public discourse about finance is more than just a problem for a family trying to balance their checkbook, or politicians trying to score points over next year’s budget – it is a weakness of our civil society. For reals. It’s also really fun for me.

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