What Happens After you Click 'Invest'?
Not financial advice.
Angel is an insanely tax advantage asset class
As with all investments, you can write off losses against other gains. So, technically speaking, you can’t really lose all your money when a startup fails. It’s more like 70%. 😬
What most people don’t know is that are are ways to avoid taxes on even the biggest gains.
QSBS: All the cool kids do it.
You likely won’t remember the term “qualified small business stock” but you’ll remember the results. Here are the basics. Your tax person would love to tell you more:
Invest in an early-stage startup.
Hold that investment for 5 years.
Your upside is exempt from federal tax.
How about $5B tax-free at retirement?
Some of the savviest angel investors use money from their Roth IRAs to invest in startups. Money in a Roth account is taxed before it’s contributed. When you withdraw it in retirement, it’s tax-free. Zero. Zilch. Nada.
Roths are great for investments with asymmetric upside.
Peter Thiel is the 🐐 (of Roth IRAs)
Peter Thiel invested $1700 from his Roth IRA into PayPal. When it IPO’d, he had $28.5M in his Roth. More than he would have ever been able to contribute directly. He continued to invest that over the years. He now has $5B in that account, which he can withdraw 100% tax-free when he turns 59 1/2.
You can pick your brain up off the floor now.
And you know you can backdoor $66K into your Roth every year regardless of income, right?