In 1999, He Put $1,700 Worth of His Company’s Stock Into a Roth IRA. By 2019, Peter Thiel Had $5 Billion in Retirement Assets That Will Never Be Taxed Again. Here’s the Roth Conversion Math for a 58-Year-Old With $400,000 in a 401(k)

In January 1999, Peter Thiel bought 1.7 million shares of PayPal, the company he had just helped found, for a tenth of a cent each, about $1,700 in all, and put them inside a Roth IRA. By the end of 2019 that account held $5 billion, according to tax records obtained by ProPublica and published in June 2021. He paid no tax when the PayPal shares were sold to eBay in 2002, because the sale happened inside the Roth, and once he turns 59 1/2 in April 2027 he can withdraw every dollar without owing a penny of income tax.

Thiel’s account reads as the cleanest case for a Roth there is: money that goes in after tax is never taxed again, however large it grows, as long as the owner waits until 59 1/2 and the account is at least five years old. The limit is that nobody can copy the price he paid. Founders’ shares at a tenth of a cent are not on offer to a 58-year-old with a 401(k), and the IRS caps a Roth contribution at $7,500 a year in 2026, or $8,600 at 50 and over. At that pace, moving $400,000 into a Roth would take 47 years.

A conversion has no such cap. Any amount can move from a traditional 401(k) or IRA into a Roth in a single year, there has been no income limit on conversions since 2010, and the only price is ordinary income tax on the amount moved, at whatever bracket it lands in. So the question for a 58-year-old is about brackets: how much to move, how fast, and what it costs against leaving the money where it is until the IRS starts setting the withdrawals at 75.

The saver and his window

Take a single filer born in early 1968, 58 this year, whose job ended in 2026. He has $400,000 in the 401(k) he left behind and $300,000 in a taxable brokerage account that he lives on. He plans to claim Social Security at 67, in 2035, at about $3,000 a month. He is a scenario, and the arithmetic treats the conversion as his only taxable income each year; interest or dividends from the brokerage account would use up the same room.

Because he has separated from his employer, he can roll the 401(k) straight into a Roth IRA in any amount he chooses (a plan that still employs you usually will not release the money before 59 1/2). The conversion carries no 10% early withdrawal penalty at any age, because it is a rollover and not a withdrawal, and he pays the tax from the brokerage account, so the whole converted amount keeps growing inside the Roth.

Born in 1968, his required minimum distributions start at 75, not 73: the SECURE 2.0 Act set 73 for people born from 1951 through 1959 and 75 for anyone born in 1960 or later. His window runs from 2026 through 2042, seventeen years, with Social Security arriving in the middle of it.

Filling the 12% bracket

The 2026 standard deduction for a single filer is $16,100, and the 12% bracket runs to $50,400 of taxable income. Add the two and he can convert $66,500 in 2026 without a dollar of it taxed above 12%. The bill is 10% on the first $12,400 of taxable income, $1,240, plus 12% on the next $38,000, $4,560. Total: $5,800, which is 8.7% of the amount converted.

Repeat it every December, with the untouched balance growing 6% a year, and the 401(k) is empty after eight conversions, in 2033, the year he turns 65. The growth means he converts $475,270 in all. The total federal tax is $40,600, about 8.5% of everything moved, because the last $9,770 in 2033 falls under the standard deduction and is taxed at nothing. The job is finished two years before his first Social Security check, which matters: once benefits start, every converted dollar also drags more of the benefit into taxable income.

Filling the 22% bracket instead

If you want it done sooner, the 22% bracket reaches $105,700 of taxable income, or $121,800 of conversion after the standard deduction. The tax on that is $17,966 a year, 14.8%: the first $66,500 still costs $5,800, and the next $55,300 costs $12,166 at 22%. Four conversions, 2026 through 2029, empty the account by the time he is 61, for $59,563 of tax in all, $18,963 more than the 12% plan, bought four years sooner.

Converting the whole $400,000 in one year is the version to avoid. Taxable income of $383,900 climbs through the 24% and 32% brackets and tops out at 35%: $103,134 of federal tax, 25.8% of the account, with $278,200 of it taxed at 24% or more. The same money moved over eight Decembers costs $40,600; the $62,534 difference is the price of doing it all at once.

What doing nothing costs at 75

Leave the $400,000 alone at 6% a year and it reaches $1,016,141 at the end of 2042. The first required withdrawal, for 2043, divides that balance by 24.6, the IRS Uniform Lifetime Table factor at 75: $41,307, whether he needs the money or not.

That withdrawal lands on top of Social Security. Combined income, the RMD plus half of his $36,000 of benefits, comes to $59,307, far over the $34,000 line, so 72% of his benefits, $26,011, become taxable. Taxable income is $49,167 after the $18,150 standard deduction a single filer over 65 gets, and the federal bill is $5,652 in the first year alone, in today’s brackets, with the top dollars inside the 22% bracket.

Run the same seventeen years with the money in a Roth and the account is the same $1,016,141, because the tax was paid from outside and the growth never stopped. No withdrawal is required, nothing he takes is taxed, and because a Roth withdrawal does not count in combined income, his Social Security stays untaxed too: $18,000 of combined income sits under the $25,000 floor. That is the tax torpedo he never fires. The honest cost on the Roth side is the $40,600 of brokerage money that paid the tax; left invested at 6%, it would have been about $87,186 by the end of 2042, against $5,652 of RMD tax in the first year and a version of it every year for life.

Three lines to respect

Health insurance before 65. If he buys coverage on the ACA marketplace, the enhanced premium credits expired at the end of 2025, and for 2026 the credit ends at 400% of the poverty level, $62,600 for one person. Cross it by a dollar and he repays every dollar of advance credit. The 12% plan’s $66,500 is $3,900 over that line, so a marketplace buyer converts $62,600 instead, for $5,332 of tax.

The five-year clocks. Each conversion has its own five-year clock for the 10% penalty on withdrawing the converted amount, but that penalty applies only before 59 1/2, which for him is 2027. Earnings become tax-free once he is 59 1/2 and his first Roth has been open five tax years: January 1, 2031, for a Roth opened in 2026.

Medicare. The premium surcharge, IRMAA, starts above $109,000 of income for a single filer in 2026 and adds $81.20 a month to the $202.90 Part B premium. It is set from the tax return two years back, so his 2033 premium at 65 comes from his 2031 return; conversions at 58 through 62 never reach it, and at $66,500 a year the later ones stay far under the line. A 2026 conversion must be complete by December 31, 2026, and since 2018 a conversion cannot be undone.

The bottom line

Thiel’s $1,700 became $5 billion because the growth happened inside an account the IRS taxes on the way in and never on the way out. A 58-year-old with $400,000 in a 401(k) cannot buy shares for a tenth of a cent, but he can buy the same account at a known price: $5,800 a year for eight years at the 12% bracket, or $17,966 a year for four years at 22%, against a $41,307 required withdrawal at 75 taxed at 22% that pulls 72% of his Social Security into taxable income. Which plan fits depends on your health insurance, your state’s income tax and what else you earn. The one thing the math rules out is converting all of it at once.

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