How Peter Thiel made BILLIONS: Invest in Startups TAX-FREE

This is how I invest into startups tax-free. This is also how Peter Thiel has over $1 billion tax-free that he's made by investing in startups. This is how Mitt Romney has over $100 million in his Roth IRA. And we're going to dive into all of this today. Now, to kick this off, I am not a CPA. I'm not a tax professional. This is not tax or legal or financial advice. I'm just sharing with you what I have done. And with that disclaimer, let's go down to the whiteboard of truth and justice here. So most of us have heard of retirement accounts like a 401 here. So So what you do is you put money in that 401, and typically your employer or business maybe even matches the money that goes in. That money is your retirement account. It used to be $401,000 was the estimated amount to retire on, which in today's world is just not even remotely close to how much money you need to retire for 40 years, in my opinion. That's a conversation for a different day. But this is how traditional finance works. You put money in, that grows until you're 60, 65, 70 years old, and then you can start pulling that money out. And again, I don't know all the tax implications. You guys know all the numbers, statistics. You pull that money out, you pay tax when it's out and you can live on your retirement through, ta-da, your 401. 401s are designed to make everybody rich but you. Okay? They're designed to make banks rich. The people that sell the policies, the insurance people that do this, makes everybody else rich besides you. It's made for, I would just frankly say, stupid Americans that don't know what else to do with their money. Additionally, we have IRAs, which are a very similar thing where you put money in. Again, you can pull that out when you're, let's call it 60 years old. You can pull that money out and you pay the tax then. Now, a few years ago, they came out with a thing called the Roth IRA or Roth 401. I'll put that one down here. And what these allowed you to do was you would pay tax upfront. So you pay tax on the money you earn, tax here. The money goes in. But once all the money you make inside of the Roth IRA It's tax-free after you're, let's just say, 60 years old. And so theoretically, if you put some money in here and it grew, you had $10,000 in here and it grew to $100,000, that $90,000 gain would be tax-free, which is pretty cool. So this thing called the Roth 401, Roth IRA came out, which a lot of people have loved and used. But still, people are using them wrong. People are just not informed. They're just not informed how to use these. Typically, most people think, oh, I'm going to put some money in. I'm going to put it in the Some bonds and I'll make 3.5% for the next 30 years and maybe I'll retire on that. Really, right now, that's actually losing you money with inflation. You're actually at a negative. You're at a loss right there with inflation. Now, typically every year they have a contribution limit for these. So right now, the contribution limit for both of these is $6,000 a year. And in a 401, the contribution limit is $22,500 in 2023. So how the heck does someone like Peter Thiel that can only put $6,000 or $22,000 a year have over $1 billion in his tax-free accounts, his either Roth IRA or Roth 401? I'm not sure which one he has. How does someone do this? And it's literally tax-free. All that gain, he pays $0 in tax on. Well, he does something like this. This is actually something that I've done as well for my most risky investments. Instead of putting money into these Roth IRAs and investing them in bonds that make you 3.5% or the S&P. He uses those for the most risky bets possible. Additionally, most employers don't allow you to invest into startups from your 401 or Roth IRA because they're contributing. They will only let you invest into bonds or the S&P or something that they choose. So what you need to set up or what I set up at least was called a self-directed Roth 401. What this allows me to do Is every year it's self-directed. I can put $22,500 myself, and I'm married, so I can put my wife as well, $22,500 into a self-directed Roth IRA. And then every year it's self-directed. So we actually have a service that helps her do this, but we can make pretty much any investment we want. We can invest into crypto, we can invest into startups, into companies, etc. So we take our money and we make angel investments. Every year. So what happens? Let's just say we— let's just round this number to $50,000. Okay. We make an angel investment of $50,000. It goes okay. It goes decently well. We return. Let's just say we double our money in the next couple of years. We have now $100,000 in there. And that's again tax-free. But I have to leave it in there. It's tax-free as long as I leave it in there. During that time period, we added more money. We contributed another $50K. So we're now a total of $150K in our self-directed Roth 401. I then can take that $150K and invest into another startup. This is kind of what Peter Thiel did. That startup does well. Let's say I get a 10x. I now have $1.5 million. Again, I can't remove it from my Roth 401, so I just reinvest it. And then I take that $1.5 million and I invest into something like Facebook at its earliest days, which is exactly what Peter Thiel did. And ta-da, that kabooms to $100 million. Wow. Still though, it's in my self-directed Roth 401. Now, to this point, you're probably like, well, Bridger, that's useless. I can't use it until I'm 60 years old. No, wait, hold on. I'll share this with you. This is what Peter Thiel did to the tune. I think he has over now two and a half billion dollars, all tax-free. It's all in there inside of his self-directed Roth 401 or self-directed Roth IRA, which is pretty cool. Okay, this is how the rich keep getting richer and don't pay taxes. Now Bridger again, well that's useless though. Peter Thiel can't use that for anything. No, yes he can. We made another video about this concept of buy, borrow, and die. This is what the wealthiest people in the world do. So for example, let's say our our friend, our boy Jeff Bezos. Bezos, how do you How do you spell Bezos? There you go. Whatever. However you spell it. Okay? Jeff Bezos. He wants to buy a yacht. Let's say that yacht is just cool, just a standard $100 million yacht. You know, nothing big for Jeff Bezos, right? So, if he wanted to buy a $100 million yacht, he's got Amazon stock. With the current way taxes work, he'd probably need to sell. So, I'll put kind of 2 options here. He could sell $200 million of stock. Depending on where he lives and stuff, he probably has good estate planning. But let's just say they take 50%, which they do in a lot of the highest tax brackets. So then he has $100 million liquid and then he can go buy his yacht. Maybe it's a little bit less. Maybe he has to sell $150 million depending on his tax bracket. But let's just call it $200 million. OK? All right. He loses essentially $100 million to taxes by doing that. Kind of stinks. So instead of doing this, he does borrow. He already bought or he owns Amazon stock. He now borrows against his stock. So instead of selling his stock, he leaves his stock in place. He borrows $100 million from— The bank. JPMorgan Chase, $100 million. He's going to pay maybe 3.5% a year. He's Jeff Bezos, though, so he's probably going to pay a lot less. But let's just call it 3.5% a year. So that's $3.5 million a year. But he gets to keep $200 million of Amazon stock. And let's just say Amazon averages, it's kind of been going, it's gone up at least around 5% to 10% per year. So over the next year, let's say that goes up. Let's just call it 5% on the low end. He makes $10 million here. His stock goes up $10 million to $210 million. Because he held onto his stock. He pays $3.5 million in debt service and makes a positive spread right there of $6.5 million. And by the way, this is a tax deduction. Paying interest payments is a tax deduction. So, he can actually write $3.5 million off his taxes and he still gets to control and own a yacht. Kind of crazy. And oh, by the way, that's going to keep compounding. Amazon stock hasn't gone up just 5%. It's gone up 10%, 15%, 20%, 30% over the years. And that $200 million stock 10 years ago is now worth maybe $800 million. All while he owns a yacht and pays 3.5% on it every year. This is the concept of buy, borrow. And then when he dies, you never sell either. You just pass that. This is estate planning. You pass this on to your next estate. So, back to Peter Thiel. He has, let's just call it $2.5 billion in his account. He can borrow against it. He can borrow against his account to go buy a $100 million yacht, Wow. He keeps making new investments and this pot of gold keeps growing. And maybe in a couple of years, it's going to be $4.5 billion or $8.5 billion because he can keep making bets and it's all done tax-free. This is how, and again, you can be mad in the comments. I hate rich people. They don't pay taxes. This is how the IRS has written the tax code. This is how they've done it. They've incentivized us to do things like this. And so we're just like, okay, we'll just keep following the incentive packages that the IRS puts out. You can either hate rich people or you can join them. I'm in the camp of I'm going to try to join them. Okay. So there you go. That is the concept of how you can use this. I'm actually doing this right now. I have a self-directed 401 that I'm using right now, a Roth 401 and a traditional 401 that contribute to. Go check it out. Again, I'm not a tax professional. Go find professional people that do this for you, but I want to give you the concept today. Y'all are amazing. I'll see you in the next video. Bye.