Warren Buffett's deputy explained how he snowballed his retirement account from $70,000 into $264 million, how he shrugs off losses, and how people can save a fortune
- Warren Buffett's deputy grew his retirement fund from $70,000 to $264 million in less than 30 years.
- Ted Weschler explained his strategy and offered tips for savers in a recent interview.
- Weschler shared how he dealt with losses and spoke about his role at Berkshire Hathaway.
Warren Buffett's deputy grew his retirement fund from $70,000 to $264 million in under 30 years. He detailed how he did it, shared the way he shrugged off investment losses, and offered tips on saving for retirement in a Washington Post interview in the fall of 2021.
Ted Weschler, who helps Buffett manage Berkshire Hathaway's investment portfolio, discussed his approach with Allan Sloan for the writer's latest column. ProPublica first disclosed the size of Weschler's nest egg in June, citing federal tax returns it obtained.
"In a perfect world, nobody would know about this account," Weschler told Sloan in an email, adding that he hoped the revelation would motivate people to start saving and investing early in their careers.
The investor opened his individual retirement account (IRA) in 1984. He was 22 and earning a salary of $22,000 a year as a junior financial analyst at WR Grace, a chemicals company. Maximizing his contributions and capitalizing on a generous employer match, he grew his account to over $70,000 by the end of 1989 — the year he quit his job to start a private-equity firm, and transferred his savings into a self-directed IRA under his control.
Weschler went on to launch a hedge fund in 2000, which delivered after-fee, compounded annual returns of 22% for its clients between 2000 and 2011. He joined Berkshire in 2012 after shelling out $5 million to join Buffett for his annual charity lunch in 2010 and 2011.
The investor's retirement fund ballooned in value by more than 300,000% between 1989 and 2018, despite his IRA shedding 52% of its value in 1990 after two key holdings tanked that year. Weschler brushed off the unrealized loss by focusing on learning from it.
"One of my personal investment mantras is that there's no such thing as a loss, it's just an unmonetized lesson," he told Sloan.
Notably, Weschler converted his IRA into a Roth IRA in 2012, paying over $28 million in federal income tax to do so. The switch means he won't owe any taxes when he cashes out his retirement account.
Buffett's deputy told Sloan that he'd paid less attention to his nest egg since joining Berkshire, partly because there was no longer an overlap between the investments he analyzed for work and those he would buy for his account. He now seeks out companies that can absorb at least $500 million without giving Berkshire a stake of 10% or more, which implies he focuses on businesses with a market capitalization of over $5 billion.
Echoing Buffett, Weschler emphasized to Sloan the value of index funds for people who don't have the time or interest to study investments closely. He said that if his $70,535 in savings at the end of 1989 had been parked in Vanguard's S&P 500 index fund, it would be worth about $1.6 million as of June 30, 2021 — a roughly 23-times gain.
"That $1.6 million drives some very simple advice: Start early, maximize the (employer) match, invest 100% in equities, and ignore all the other noise," Weschler said.