There’s a painful reality every investor eventually faces… paying taxes on their profits to Uncle Sam.

But what if I told you there’s a way to avoid coughing up a portion of your gains to the government… and it’s completely legal?

It’s a “loophole” used by the super-rich for years. But few Americans know about it.

Here’s how powerful this loophole is…

According to a recent report by ProPublica, PayPal founder Peter Thiel used it to turn a tiny grubstake of $1,664 in 1997 into a $5 billion fortune today.

And when Thiel decides to retire, he’ll be able to withdraw as much of that money as he wants without owing any tax at all.

He won’t pay income tax. He won’t pay capital gains tax. And it’s almost certain he won’t pay any state or local tax, either.

Under current federal tax law, Thiel could owe as much as 37% of that $5 billion to the government. Instead, he’ll likely keep the extra $1.85 billion for himself.

Thiel isn’t the only wealthy American benefitting from this loophole. According to the same report…

Hedge fund manager Randall Smith had $252 million in this type of account… Robert Mercer, another hedge fund manager, had $31.5 million… And even Warren Buffett, who frequently argues for higher taxes on the rich, had more than $20 million in one.

Today, I’ll tell you what this loophole is… and how you can use it to create the “holy trinity of retirement investing.”

A Dead Senator’s Crowning Achievement

You’ve almost certainly heard of Individual Retirement Accounts (IRAs). They allow you to save extra money outside of employer-provided pensions and 401(k) plans.

You can contribute to these accounts and invest in securities like stocks, mutual funds, and ETFs. And you won’t pay taxes on your initial investment or gains until you start making withdrawals at age 59½.

(Money taken out before then is subject to both regular taxation and a 10% early withdrawal penalty, but there are some hardship exceptions.)

Lawmakers have made changes to these accounts over the years – everything from increasing contribution limits to creating entirely new types of IRAs.

But the Taxpayer Relief Act of 1997 created a new type of retirement account called the Roth IRA (named after the bill’s sponsor, Sen. William Roth of Delaware).

Up until then, investors were only allowed to contribute pre-tax money into their IRAs.

But in exchange for paying taxes upfront, investors using Roth IRAs would never have to pay taxes on their accounts again… no matter how big the accounts got.

The table below shows you how Roth IRAs differ from traditional IRAs.

Traditional IRAs Roth IRAs
You contribute pre-tax money and can save on your current taxes by lowering your taxable income (subject to certain income caps). You contribute after-tax money, with no upfront tax-savings.
Your contributions and earnings are subject to taxation upon withdrawal. Your contributions and earnings will never be taxed again, if you meet the basic withdrawal guidelines.
You must stop contributing and begin withdrawing money at age 70½. No minimum withdrawal requirements and you can continue contributing as long as you have earned income.

Note: The above information is for general tax purposes only and doesn’t cover every aspect of IRAs. We encourage you to consult with an accountant or tax adviser regarding your specific financial situation.

Right now, more than 60 million Americans have IRAs. And almost all of those are with traditional Wall Street brokerages.

That means their owners are limited to investing in traditional assets like stocks, funds, and money markets.

Wall Street loves this because they can extract plenty of commissions and fees from IRAs for decades on end.

But as I’ve repeatedly pointed out, the traditional assets of Wall Street won’t move the needle on your net worth.

That’s why people like Thiel use a special type of “backdoor” account to fund their Roth IRAs with asymmetric ideas generally not allowed in traditional retirement accounts…

DIY Retirement Investing

The loophole I’m talking about is commonly called a self-directed IRA (SDIRA).

An SDIRA lets you invest in the type of asymmetric ideas we recommend at PBRG – like cryptos, startups, and private real estate plays – while minimizing or even eliminating the tax burden on their gains.

And based on my team’s research, we estimate less than 1% of all IRAs in the U.S. are this special type.

SDIRAs are similar to other IRAs. You can have a traditional SDIRA, Roth SDIRA, etc. The main difference is SDIRAs aren’t held at regular brokerage accounts.

In Thiel’s case, he’s using this loophole to save a fortune in future taxes on the profits he’s made from his private PayPal shares.

Here’s how he did it…

In 1997, Thiel received nearly 1.7 million pre-IPO shares of PayPal valued at just $0.001 apiece (about $1,664). He placed those shares in a Roth SDIRA.

Since it was an SDIRA, Thiel could invest in alternative assets like pre-IPO PayPal shares. And since it was a Roth SDIRA, Thiel was taxed upfront.

So his contributions and earnings will never be taxed again (assuming he meets the basic guidelines).

The chart below tells the whole story…


Under current federal tax law, Thiel could owe as much as 37% of that $5 billion to Uncle Sam. Instead, he’ll keep the extra $1.85 billion for himself by using a Roth SDIRA.

Now, there is no way to perfectly calculate Thiel’s actual federal tax rates.

But if we simply take the top long-term capital gains and ordinary income rates… the federal tax savings are incredible.

The Holy Trinity of Retirement Planning

Smart investors like Peter Thiel have been using this loophole for decades… racking up billions in tax-free profits.

But ordinary Americans can use it to create what I call the “holy trinity of retirement planning”…

And it involves putting your bitcoin in an SDIRA.

These platforms can pay up to 2–3% interest on specific crypto assets… but you can also benefit from bitcoin’s rising price and the tax benefits of an SDIRA.

To show you just how powerful the holy trinity can be, I had my research team look into them. Here’s what they found…

One man who quit his job at Intel in 2016 rolled over about $300,000 from his 401(k) to a bitcoin SDIRA. Today, the account is worth between $10 million and $20 million.

Another investor was a NASA rocket scientist. He had retired but took such a hit in 2008 that he was forced to go back to work. Since opening a bitcoin SDIRA, his account is up more than 44 times over. And he’s since retired again.

And yet another investor is a registered nurse from middle America. He invested $30,000 in a bitcoin SDIRA. It’s up almost over 8x to $250,000.

Friends, when you combine the ability to earn steady income… crypto’s capital appreciation potential… plus the tax protection of an SDIRA… you have the holy trinity of retirement planning.

(Paid-up Palm Beach Letter subscribers can read about my two favorite bitcoin SDIRAs right here.)

Remember, this information is for general tax purposes only. Before you make any decision about your retirement planning, please consult your accountant or a tax professional.

But if you want to really move the needle on your net worth and accelerate your wealth-building journey, consider opening an SDIRA and funding it with bitcoin.

Let the Game Come to You!

Teeka Tiwari
Editor, Palm Beach Daily

P.S. In the most recent issue of my Palm Beach Letter service – released just last week – I shared two crypto SDIRA options that will help you save on taxes and earn interest.

And as your crypto moves higher, so will its underlying technologies and projects… including one I’m calling “Genesis.”

To learn more about this multitrillion-dollar project… and how you can access my two SDIRA recommendations todayclick here.