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Warren Buffett built much of his fortune by saving diligently, investing shrewdly, and compounding his money over multiple decades. Ted Weschler, one of the investor's deputies at Berkshire Hathaway, grew his retirement fund from $70,000 to $264 million using the same approach, ProPublica reported this week.
Weschler — who helps Buffett manage Berkshire's $270 billion stock portfolio — told ProPublica in a statement that he opened his individual retirement account (IRA) in 1984, when he was 22 years old and earning $22,000 a year as a junior financial analyst.
Maximizing his contributions, taking advantage of a generous employer match, and buying assets that rose in value meant he ended 1989 with over $70,000 in his account, Weschler said. He quit his job to start a private equity firm that year, and transferred his retirement savings to a self-directed IRA account to give him full control.
Over the next 29 years, Weschler invested the money in that account only in publicly traded securities that any American could buy, he told ProPublica. In contrast, PayPal cofounder Peter Thiel used a Roth IRA to buy shares in PayPal, Palantir, and Facebook while they were private companies, enabling him to grow a $1,700 contribution in 1999 into $5 billion in tax-free assets as of 2019, ProPublica reported.
"The investing success of this account has been a function of careful stock selection, exceptional luck and a multi-decade time period," Weschler told ProPublica. "To have a sum of this magnitude built up in my Roth IRA is certainly beyond anything that I ever expected."
Weschler added that he grew his retirement account — which ProPublica reported was worth $264 million at the end of 2018 — "in a way that was available to all taxpayers with an appropriately long investment runway, i.e., the result is exceptional but it is not the product of exclusionary tax strategies."
The former hedge fund manager — who snagged a job at Berkshire in 2012 after spending more than $5 million to have lunch with Buffett in 2010 and 2011 — converted his IRA into a Roth IRA in 2012. His IRA contained $131 million at the time, and he paid over $28 million in federal taxes to execute the conversion, he told ProPublica.
A Roth IRA caps annual contributions at $6,000, but its owner can withdraw its contents tax-free once they're six months shy of their 60th birthday. Weschler will reach that mark this November.
Buffett's deputy told ProPublica that Sen. William Roth, who championed the law that created the Roth IRA in 1997, might see his case as an "aspirational example of the power of deferred consumption: each $1 saved as a 22-year-old in New York City grew over the ensuing 35 years to over $9,000."
However, Weschler acknowledged that he's been an "enormous beneficiary" of the IRA, and said he supported tweaking the tax benefits of retirement accounts above a certain size.
Weschler continues to make lucrative wagers with his own money. For example, he disclosed a 6% stake in Dillard's last October. The department-store chain's stock price has more than quadrupled since then, boosting the value of his investment to about $200 million.
ProPublica's story about Roth IRAs, based on leaked tax returns, is the latest in its series about how America's wealthiest people avoid paying taxes. The nonprofit journalism outlet reported that Buffett himself has $20 million parked in a Roth IRA, after calling out the Berkshire chief earlier this month for paying a tiny fraction of his net worth in federal income taxes.
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