In 2021, ProPublica revealed that Ted Weschler, who has been one of Warren Buffett's deputies at Berkshire Hathaway since 2012, had amassed a staggering $264.4-million Roth IRA by the end of 2018.
After learning of Weschler's sizable IRA, Allan Sloan of The Washington Post contacted him to inquire about how he had accumulated such substantial retirement savings.
How did Weschler do it?
Weschler started his career as a junior financial analyst at W.R. Grace & Co., a New York City conglomerate, in 1983 after graduating from the University of Pennsylvania.
He began maxing out his 401(k) contributions a year later, and by the time he left Grace in late 1989, his 401(k) had grown to $70,385—$34,353 from his own contributions, $12,328 from Grace's matching contributions, and the rest from investment gains.
Upon leaving Grace, Weschler rolled his 401(k) to an IRA at Charles Schwab & Co., giving him discretion over the individual investments made in the account.
In 2012, Weschler converted his IRA (which was $131 million at the time) to a Roth IRA, paying $29 million in taxes.
By the end of 2018, that $70,385 had ballooned to $221.6 million. The other $42.8 million in his Roth IRA came from accounts he set up after leaving Grace.
This means that Weschler compounded at 32% per year (even after paying $29 million in taxes), turning each $1 into $3,148.
Weschler attributes his success to a strategy of identifying undervalued bonds and little-known stocks that he believed were in better shape than the market perceived.
What lessons can we take away from Weschler's story?
While Weschler spends significant time researching companies and industries to find overlooked opportunities, for most people, index funds provide a simpler path to strong long-term returns.
If Weschler had invested his $70,385 in an S&P 500 index fund in 1989, it would have grown to over $1.6 million by 2021—not a bad outcome.
So, even if you cannot earn 32% per year, you can start early, contribute to tax-advantaged accounts, and stay the course.