Romney-Sized IRAs Get Scrutiny as Government Studies Tax Breaks

Bloomberg:  Romney-Sized IRAs Get Scrutiny as Government Studies Tax Breaks, by Richard Rubin:

About 9,000 U.S. taxpayers have each accumulated at least $5 million in individual retirement accounts, said the Government Accountability Office, raising questions about some investors’ tax-advantaged returns.

The preliminary report attaches data to an issue that drew attention during the 2012 presidential campaign, when Republican nominee Mitt Romney reported an IRA worth $20 million to $102 million. ...

Today’s GAO report said someone who contributed the maximum amount each year to an IRA from 1975 to 2011 and invested it in the Standard & Poor’s 500 Index would have about $350,000. The maximum contribution this year is $5,500, plus an extra $1,000 for people age 50 and older.

GAO, Preliminary Information on IRA Balances Accumulated as of 2011 (Sept. 16, 2014):

For tax year 2011 (the most recent year available), an estimated 43 million taxpayers had individual retirement accounts (IRA) with total reported fair market value of $5.2 trillion. About 99 percent of those taxpayers had aggregate IRA balances (including inherited IRAs) of $1 million or less. As shown in the table below, few taxpayers had aggregated balances exceeding $5 million as of 2011. Generally, taxpayers with IRA balances of $5 million or more tend to have higher adjusted gross incomes, be joint filers, and 65 or more years old. The Internal Revenue Service (IRS) statistical data GAO analyzed may not provide a precise estimate of the number of taxpayers or other quantities when the number of taxpayers in a particular reporting group is very small. Even assuming maximum contributions sustained over decades and rolled over from an employer plan, it would take an aggressive stock market investment strategy to accumulate an IRA balance over $5 million. There is no total statutory limit on IRA accumulations or rollovers from employer defined contribution plans. An individual who made the maximum contributions every year since 1975 to a traditional IRA could have accumulated about $303,420 achieving investment returns equal to the average annual Social Security interest rates.

Estimated Taxpayers with IRA by Size of IRA Balance, Tax Year 2011

Number of taxpayers						Total IRA fair market value balances($ Billions)
IRA Balance	Estimate		95% confidence		interval		Estimate		95% confidence		interval
$1 million or less	42,382,192		42,094,009		42,670,375		$4,092		$4,038		$4,147
> $1to $2 million	502,392		470,897		533,887		674		632		717
> $2 to $3 million	83,529		72,632		94,426		198		173		224
> $3 to $5 million	36,171		30,811		41,531		133		114		153
> $5 to $10 million	7,952		6,120		9,783		52		40		64
> $10 to $25 million	791		596		985		11		8		13
> $25 million	314		115		650		81		8		225