Why Does Mitt Romney Have Over $20 Million in His Individual Retirement Account?

Mitt Romney greets supporters with his wife Ann Romney in Charleston, S.C.

Joe Raedle/Getty Images.

This is more a puzzle than a scandal, but it’s certainly strange that Mitt Romney’s financial disclosure forms indicate that he has between $20 million and $100 million in his Individual Retirement Account. This is puzzling in two ways: How did he get that much in there, and why would he want to?

The way an IRA works is that you’re allowed to contribute pre-tax dollars to it, then your investments gain value tax free, and then when you withdraw money from the IRA upon retirement, the withdrawals are taxed as ordinary income. A normal middle-class person finds himself in a higher income-tax bracket when working (and earning income) than when retired, and therefore can minimize taxes by doing it this way. But there are limits in how much you’re allowed to contribute in any given year, so you wouldn’t normally end up with that much in your IRA unless you’d made some extraordinarily lucrative investments. What’s more, if you’re as rich as Romney is, your eventual IRA withdrawals are going to be large enough to put you in a high tax bracket anyway, so there’s not going to be a tax advantage to having all the money in the IRA in the first place. So far, Romney’s been attracting scrutiny for being too clever at avoiding taxes, but in this case he looks to have bungled it, unless we get a new explanation.