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A little math on Mitt Romney’s IRA

I ran across this article on Mitt Romney’s $101-million IRA and it led me to comment on Google Plus. The max yearly contribution for an IRA is $5000 (with some caveats) so it’s hard to see how one could get from there to $101,000,000 without something a bit more creative going on.

I got a few comments to the effect that Romney could have rolled over 401Ks into his IRA without penalty, and that’s definitely true. But 401Ks also have limits, and in fact the government has had limits on total deferred compensations for quite some time.

So I decided to look up the total limits for IRA and 401K contributions and do a little math. You can see the spreadsheet here.

With just an IRA, making the max contribution since 1974, and assuming a 10% annual return, a diligent saver could have amassed around $730,000. Let’s say they were also contributing the max to their 40K since 1987 (I had a hard time finding numbers before then, not entirely sure when 401K started). Our super-saver then rolled over their 401K into their IRA right before running for president in 2012, reaching a total of about $1,700,000. That’s still two orders of magnitude lower than the number cited for Romney’s IRA.

We’re still missing something important – most companies contribute something to employee’s 401K plans as well. I could find some numbers on total deferred compensation limits since 1974, so I put those into a column in our spreadsheet, again with 10% annual return. So assuming between our saver’s and their company they completely maxed out 401K contributions, we could reach $13,000,000 or so. Still an order of magnitude too low.

Now of course none of these numbers are perfect, there’s “catch up” contributions you can add when you’re past a certain age, there may have been other limits over time, etc. I’m definitely not an expert on any of this, so feel free to point out glaring errors in the comments below. It’s also possible that the Reuters article is full of hooey.

But I’m a programmer, and one thing you learn as a programmer is to watch out when your numbers are an order of magnitude too low or too high.

I really doubt Mitt Romney has done anything illegal with his IRA. But it’s hard for me to see how Romney could get to such heights without something along the lines of putting in investment partnerships and setting their value low, as alluded to in the Reuters article. Which is great for him, and a nice clever trick to get around paying his taxes, but personally I don’t find it very impressive.

Not to get too political on this (mostly) geeky blog, but it seems like yet another one of those things you can do if you already have a ton of money / lawyers / accountants at your disposal. Of course, everybody goes through their deductions, puts in last-minute charitable contributions, etc. to try to bring their tax bill down, but not everyone can take it to this level and the people who can take it to this level need tax relief the least.

Let me pull this post back by putting it in the geekiest way possible: You ever play D&D with one of those guys who’s a total rules lawyer? Like, he has memorized every expansion of every edition since Gary Gygax threw a magic missile, and every encounter takes an eon as he pulls out every possible table, caveat, and vaguely-worded paragraph to ensure that his character never loses not even one hit point? Playing D&D with guys like that is excruciating, but it’s even less fun if they insist on starting the game 10 levels higher than everyone else too.

BTW, here’s the spreadsheet for your viewing pleasure. Like I said, feel free to point out everything I’ve gotten wrong, I’m sure there’s something.

Units that Measure Up: From Giga-watts to Hella-tons

UC Davis physics student Austin Sendek has proposed that the prefix “hella-” be used as a standard prefix for 10^27th power. If that sentence doesn’t make much sense to you, you’re in luck – there’s an explanation in Part 1 below. If you could parse the sentence but think it’s a rather lame joke, don’t make up your mind quite yet – I’ll lay out the surprising history of some units that might make you reconsider in Part 2.

Part 1: Giga-what, giga-who?

Most of the time you and I can get by with some pretty small numbers. I might buy a 5-pound bag of flour or ask you to lend me 20 dollars, and there’s nothing wrong with that. But if you work in science, engineering, economics, or other similar fields you inevitably need to count or measure things that are really, really big, and you don’t want your readers to spend all their time counting digits rather than appreciating your brilliant prose.

This is why we have the International System of Units (SI) and its prefixes. When Doc Brown is pouring pilfered plutonium into a DeLorean to send it to the future, rather than wrapping Marty’s head around 1,210,000,000 watts he can simply exclaim, “1.21 gigawatts!” When Commander Data is downloading MP3s, he can say he’s got 100 petabytes to fill, rather than boring Geordi with 100,000,000,000,000,000.

But what happens when you get past peta- (10^15), exa- (10^18), zetta- (10^21) and yotta (10^24)? Right now you’re stuck. At this point we’re in the range of some ridiculously big numbers, but the universe is ridiculously big. The mass of the Earth is about 5,980,000,000,000,000,000,000,000 grams, or 5,980 yottagrams – but who’s got time for thousands of yottagrams?

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