Last week, ProPublica released a story that showed a prominent Silicon Valley entrepreneur’s Roth IRA is worth around $5 billion. Yes, that is billion with a “B”, which is about 833,333 $6,000 annual IRA contributions, if you are curious how many years you would have to save to get that much in your IRA.

The reason we now know this information is because a government bureaucrat, most likely an IRS upper management person, gave PayPal co-founder Peter Thiel’s private tax return information to a reporter. While we can only speculate why a public servant would willfully betray the trust of taxpayers, it isn’t much of a stretch to assume that the person is part of a larger effort to portray those with wealth as examples of inequity that require government intervention to rectify.

Unwittingly, the story also paints a beautiful portrait of the potential power of preparation and planning. While luck also played a huge role in Thiel’s outsized nest egg, it was over 2000 years ago that Roman Stoic Philosopher Seneca the Younger observed, “Luck is what happens when preparation meets opportunity.” To understand the preparation that laid the groundwork for Theil’s windfall, we first need to go back to 1997, when Roth IRAs were created by the Taxpayer Relief Act of 1997.

The maximum contribution to Roth IRAs in the late 90’s was $2,000 per year. The ProPublica story cites that Theil had “a retirement account worth less than $2,000 in 1999”, which suggests that he contributed to his Roth IRA during one of the first years it was possible. He went on to raise capital to start a private equity firm, that firm later became PayPal.

He apparently used some or all of his funds in the Roth IRA to invest in that venture. Or perhaps it was later when he was an early investor in Facebook. Whatever the investments that grew to their current level, it was only made possible by first making an IRA contribution.

A success story like Thiel’s, while presented by ProPublica as an example of capitalism’s excess or unfairness in the tax code, actually provides a shining beacon of hope to us all that saving and investing can offer great rewards. Instead of lamenting the inequity of an outlier, we should seek to emulate his plan of saving what we can and investing for higher expected returns.

We may not hit the next jackpot startup, but we can reasonably project that someone that saves and takes appropriate risks will acquire more equity than one that does not. Maxing out retirement account contributions should be the goal of virtually every working person, but good should not be the enemy of great. If you can’t afford the maximum, put in what you can afford. The sooner you do so, the luckier you are likely to be.

But even Thiel’s “Tax Free” Roth IRA will ultimately pay his “fair share”. Current estimates place his net worth over $7 billion. With an estate tax of 40% in the US, the people would collect over $2,800,000,000 of his fortune if he were to die today. But I would be willing to bet he has a plan for that, too.

Want to review your plan? Get in touch for a review.