In 1975, both Mitt Romney's business career and individual retirement accounts were launched. Back then, the maximum IRA contribution was $1,500 a year; in 2012 you might put in as much as $6,000. So how did Romney famously accumulate over $100 million in his IRA, as has been reported?

The short answer is, he probably didn't. On his federal financial disclosure report, Romney valued his IRA between $20.7 million and $101.6 million. Thus, despite all the attention paid to his "$100 million IRA," Romney might have a mere $21 million or so in his retirement account. Indeed, a precise valuation could be difficult if Romney's IRA holds interests in private companies, as seems likely.

Still, going from $1,500 or $2,000 or even $6,000 a year to an eight-figure IRA is impressive, and Romney obviously didn't do it with four-figure deposits. "You accumulate that much in an IRA in two ways," says Mary Kay Foss, a director with the accounting firm Sweeney Kovar in Danville, Calif. "Those are rollovers from qualified plans and successful investing in the IRA."

Romney probably did both, but not in that order. He was at Bain Capital through 1999, participating in the company plan, where annual contribution limits were as high as $30,000. Bain is a venture capital firm that prospered in the bull market of the 1980s and 1990s, and Romney loaded up his qualified plan with interests in nascent companies backed by Bain. Eventually, he rolled his account balance into an IRA.

Non-Conventional Assets
Thus, one lesson to draw from Mitt Romney's IRA is that clients, especially ultra-high-net-worth clients, needn't stick with mainstream stocks and bonds and mutual funds for IRA investments. With few exceptions, such as shares of S corporations, IRA owners can put their money virtually anywhere. Non-conventional IRA investments may deliver superior results for very wealthy clients who have access to exceptional opportunities, such as Romney had, or who are knowledgeable about specific assets such as real estate.

"Bain was one of the first companies with the management expertise and capital to fund early stage companies," says Foss. "Many venture capital funds will distribute the shares of companies they invest in or the proceeds from a sale, so investors have more funds to put into the next deal." Reportedly, returns for Bain investors averaged 50% to 80% annually.

Now, if Romney had been a real estate developer who tucked La Jolla and Marco Island properties into his IRA in the last quarter of the 20th century, that might have been relatively straightforward. However, he was a venture capitalist who wanted promising private companies for his retirement fund, which raised at least two not-so-straightforward issues.

First, how do you value shares of a private company when they're placed into an IRA? That's never easy, and tactics used by Bain further complicated the issue. Its portfolio companies were given two share classes: A and L. The L shares were the safest, accruing interest at 10% or higher in some cases, and getting first dibs on liquidation proceeds. The A shares were riskier, behind the L shares for getting money, but entitled to most of any gains after the L share holders got their due.

Bain had flexibility in assigning values to these share classes. Pointing to the higher risks, the A shares were valued much lower than the L shares. Anyone who put the low-valued A shares into the company plan could contribute many shares, up to the $30,000 limit. The payoff for success would be greater, too. In some Bain deals, the A shares reportedly enjoyed gains for more then 30 to 1 while L shares doubled. It's true that holding the speculative L shares in a retirement fund wastes the opportunity for low-taxed capital gains, but this practice also avoids having to pay tax every time profits are realized and reinvested.

In some early Bain deals, the L shares were valued at nine times the A-share value; recently, Bain has used a 4 to 1 ratio, which would decrease the profit potential of the A shares. Going forward, clients in similar situations should be sure that the valuations of illiquid IRA assets are handled professionally, but being aggressive might make sense. "I've seen the IRS challenge valuations of private companies in estate tax situations, but not when it comes to lifetime IRA valuations," says IRA expert Ed Slott, a CPA based in Rockville Centre, N.Y.