Monday, January 15, 2007

The Saga of Anne Scheiber

Once more, I swerve away from animation to tell a tale every animation employee faces: earning a living and saving for retirement.

I relate the following story because a) it's a good one, and b) I've had too many people call or come through TAG's office over the years and say (more or less) that they were 63 years old and flat broke, without job prospects, and without any pension except for the piddly amount they were getting from Social Security. So listen up:

Ever heard of a woman named Anne Scheiber? Probably not, but Anne is the poster woman for "It's never too late to start investing."

Anne was an IRS examiner back in the 'forties. And thirties. Along about 1944, Anne reached retirement age and decided it was time to hang it up. And so she took retirement…on a queenly $3,150 annual government pension.

For the next fifty-four years, Anne lived quietly and simply in her small, rent-controlled apartment in New York City. She clipped coupons, shopped for discounts at the local stores, ate home a lot.

As far as anyone could tell, Anne was just one more Big Apple pensioner, squeaking by on a small and miserable fixed income. But lo and behold, when Anne passed away in 1995 at 101, her will was opened and the larger world found out that the little woman in the tiny apartment had left a $22 million dollar estate to Yeshiva University. And that her stock investments were earning around $1 million per annum, most of which she didn't spend.

So what the hell was going on? Actually something relatively simple. Back when Anne retired, she took the $5000 in savings that she had scraped together and began investing it herself.

Anne, you see, had been burned by various stock brokers during the 1930s, and had resolved to never depend on them again. She did her own research, chose her own stocks, and by the time she passed away 53 years later, her stock choices had grown at the rate of around 12.5% per year. And the paltry five grand had mushroomed to $22,000,000 and counting. (Ah, the magic of compoudning.)

Anne's strategy was simple. She did her homework. She bought quality stocks. And held them. And held them. And held them. When she died, she had 60% of her assets in stocks, 30% in bonds, and 10% in cash. The classic asset-allocation fund.

The moral of this story is not: make big run-ups on your investments every year, nor is it to live like a church mouse while you have millions tucked away. The point of the story is, no matter how old you are, no matter how far down you think you might be, you always have the ability to put money into an investment and commence building a nest egg.

If Anne Scheiber was able to do it after retirement on a three-thousand dollar a year pension, you and I and everyone else in this on-and-off business can do it.


Anonymous said...

Not sure how you are doing your math. But at 12.5 return over 53 years, that means she had to be putting in $400 a month into her investments in order to come near the $22 million. If she was making $3,150 annually through her pension that means she lived with zero expenses.

Even with adjusting for inflation, I think your math is off somewhere.

Great story though.. lol

Anonymous said...

After posting my comment, I followed the link in your article. Even that link pokes holes in the story.

Whatever the case, your point is taken. Save your money for retirement.

If you want to die with $22million to give your kids but live like crap along the way- follow Annes example. (Of course, to really turn $5,000 into $22 million, you have to do much better than 12.5% return over 53 years).

yehaaawww :)

Anonymous said...

Hi, I'd like to make a book recommendation. It's called, "The Richest Man In Babylon" by George S. Clason, written in the 1920s (latest re-release 1988). In a story format, it describes how to keep bits and pieces of your paycheck for later on...advice stories staged in the ancient city of Babylon. People have been saving money like this for decades. No matter how much or how little you make, if you are salaried or are living from check to check, you can always figure out how to set some aside for later, without reducing your quality of life to wretchedness. And believe it or not, having money set aside (even if it's just a little bit) does remarkable things for your frame of mind, not to mention actually GIVING you security.

I'm not always the best person to talk about money and saving and so on, so I found this book really handy. You may also.

Steve Hulett said...

At arithmatic, I stink.

The original post had Ann earning 22% per annum. The linked story had her earning 12.5% per year, with a next egg larger than $5,000 when she started.

My guess is that she earned somewhere in the 15-20% range. But since nobody knows precisely what she actually started with, it's guesswork.

The point here is, most people can earn something around 8-10% over time with diversified investments. And with compounding, earning accelerates year by year.

I focus on this stuff because, in my line of work, I've encountered too many people who've made bad economic choices and now are just scraping by. I know too many people who were earning big salaries in the mid-nineties and now struggle just to pay mortgages.

When you're 45 years old, it's late in the game to start over from scratch.

Steve Hulett said...

I'd like to make a book recommendation. It's called, "The Richest Man In Babylon" by George S. Clason...

Read it. Terrific book.

Investing is fairly easy. It's the sticking with it and not panicking when the market tanks that's hard.

Anonymous said...

Whether the math works out in this story or not is beside the point. The important message here is to set aside part of your income for when you don't want to (or can't) work any more.

It's not that tough to do, really. Ideally you should stash 10% of your income, but if that's too big a bite, start at 5% - just START! Cut back one latte per week, pull the change out of your pocket at the end of every day, or set aside the amount you saved when buying sale items. You'll be surprised how quickly it adds up.

Anonymous said...

I have a friend that has been working in the animation business for a long while now. He makes a good living doing what he does. But, he is an active investor and makes more than $100K a year in his investments. Now that is nice additional money. He is someone to pattern savings after.

Currently he is working on a short film of his own and still making more than most of us make at a full time job. oii!

Anonymous said...

I wish to thank Steve and everyone else for posting these investment stories/tips. It's inspiring.

I currently invest the maximum allowed for my Roth IRA every year, which should help me out in my old age. I also keep the bulk of my savings in a high-interest online savings account. After reading this page, though, I realize that I should take the time to learn more about investing.

Anonymous said...

I think it's great what Anne did with her life. I'd like to see Annes' handwritten letter that she left for the school which outlines her life and her beliefs.

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