PENSCO: Presidential Candidate Mitt Romney Used a Tax-Deferred Account to Build Wealth in His IRA

Gov. Romney Missed Opportunity To Minimize Tax Upon Withdrawal of IRA Savings; Roth IRA Would Protect More of His Asset Appreciation

SAN FRANCISCO--(BUSINESS WIRE)--Presidential candidate Mitt Romney likely grew his Individual Retirement Account (IRA) substantially through a private equity investment in an IRA account that benefitted greatly from tax-deferred appreciation, but could have grown even larger, according to PENSCO Trust, a leading provider of custodial accounts for tax-deferred investments.

“PENSCO was founded to give people the opportunity to achieve financial independence”

According to The Wall Street Journal on Thursday, January 19, 2012, Gov. Romney’s former employer, Bain Capital, made an investment in an IRA on his behalf that appreciated to between $20 million and $101 million. According to the paper, the investment appears to have been in a traditional IRA instead of a Roth IRA, which offers additional tax benefits in protecting investment gains.

Founded in San Francisco 22 years ago, PENSCO has more than 17,000 clients who have invested IRA money in start-up companies, real estate, mortgages, private placements/LLCs in both equity and debt, and venture capital investments. PENSCO’s average account size is $160,000, but also has more than 250 IRA accounts between $1 million and $100 million. Three accounts each have more than $100 million.

“PENSCO has no direct knowledge of Gov. Romney’s finances, but his IRA appears to have benefitted from a private equity investment that appreciated tax deferred under applicable IRA rules,” said PENSCO CEO Kelly Rodriques. “Had the investment been in a Roth IRA, the gains would have been tax deferred and potentially tax free upon withdrawal. The Internal Revenue Code has allowed private equity, venture, and real estate investments in tax-deferred accounts for more than 30 years, but this opportunity has not been well understood by investors. Gov. Romney’s IRA highlights the wealth building opportunity that Americans of all backgrounds can achieve with careful investing through IRAs.”

To invest IRA savings in private placements/LLCs and real estate, an individual must open an account with a qualified IRA trustee or custodian. These investments must be made and then held in a SEP-IRA, Roth IRA or Traditional IRA to appreciate tax deferred. Money rolled over from a 401(k) into an IRA can also be invested in alternative assets. Alternative assets qualify for the same tax-deferred advantages as exchanged-traded assets, such as stocks, bonds and mutual funds.

A Roth IRA can maximize an investor’s capital gain. Initial IRA contributions aren't tax-deductible, but withdrawals of contributions held over five years and taken after the age 59 ½ are tax free. Unlike a traditional IRA, which requires withdrawals by 70½, Roth IRAs have no similar age withdrawal requirement.

PENSCO currently has more than 11,000 IRA accounts holding private placements (private company stock and Limited Liability Corporations) and 14,000 IRA accounts with real estate investments. These accounts have been administered in compliance with Internal Revenue Code regulations governing IRAs.

“PENSCO was founded to give people the opportunity to achieve financial independence,” Rodriques said. “However, anyone who considers investing IRA money in alternative investments must perform their own due diligence, cautiously evaluate the risk and rewards, and be vigilant about fraud. The role of providers like PENSCO is to hold these assets and provide timely and accurate reporting. Investors themselves must evaluate the appropriateness of any investment.”

How It Works: Tax-Deferred Accounts For Alternative Assets

PENSCO provides investors with a wide range of educational resources to understand the rules governing tax-deferred accounts. Among the resources available at www.pensco.com:

• Q&A about the process of establishing a custodial account for tax-deferred investments in alternative assets
• 10 Dos and Don’ts of making alternative investments in tax-deferred accounts
• A comparison of different types of IRAs and their benefits

About PENSCO

PENSCO Trust Company is a world-class custodian that helps independent-minded investors build wealth in taxable and tax-advantaged accounts. Founded 22 years ago, PENSCO offers custodial services that enable investors to hold and administer alternative assets, such as start-up companies, real estate, mortgages, private placements/LLCs in both equity and debt, and venture capital investments. A regulated banking company, PENSCO also works through institutions, providing services to plan sponsors, Registered Investment Advisors, financial planners, family offices, accountants, attorneys and other advisors seeking a proven custodian for their clients. PENSCO has more than $4 billion in assets under custody and 17,000 clients. For more information, visit www.pensco.com or 415.274.5600.

This information is for general informational purposes only and is not intended as a recommendation for any investment opportunity or to be a substitute for specific individualized tax, legal or investment planning advice. Furthermore, this information is not intended to be an endorsement or recommendation of any presidential candidate. Where specific advice is necessary or appropriate, PENSCO recommends consultation with a qualified tax advisor, CPA, financial planner or investment manager. PENSCO performs the duties of an independent custodian and, as such, does not provide investment advice, sell investments or offer any tax or legal advice. Investments are not FDIC insured and are subject to risk including the loss of principal.