2008-04-16

Success Stories: Retired At 51 With Over $1.4 Million—And Staying Aggressive

Kiplinger’s brings us the story of Rick Albrecht. Albrecht is retired at age 51 (and it’s not quite clear how long he’s been retired). He came from a modest background, enlisting in the Army at age 17 because he and his family did not have the money for him to go to college. He did well and became an officer.

Albrecht’s military service brings him a pension and medical-care benefits that may not be available to many of us. But the focus of the article—and what impressed me—was his accumulation of investments worth $1.4 million.

It’s not quite clear what rank Albrecht held at the time he retired, but it sounds like he must have served on the order of 30+ years. According to the U.S. Army website’s discussion of pay, an active-duty officer currently makes annual “basic pay” in the range from $30,668 (for a Second Lieutenant with less than 2 years experience) to $57,157 (for a Captain with more than 6 years experience). If you were to assume a 10% compounded annual return over Albrecht’s 30 years in question, Albrecht would have had to been putting away about $8,500 a year to hit $1.4 million. Extrapolating, that looks like it would have been about 15% of his gross salary at the end of his career—and probably quite a bit more than that in the earlier stages of his career. Maybe 28% or more back then. Or perhaps he accelerated his savings in more recent years, or did particularly well with his investments in more recent years, or both.

In any event, if it was 15%, that’s a lot—but it’s a number that many of us mere mortals could shoot at (as there seem to be quite a few folks in the personal-finance blogosphere who are saving that much or more). And it likely illustrates again the power of compound gains over a period like 30 years.

As alluded, Albrecht may have played his cards right, or gotten lucky, or both—to realize better than 10% returns. Albrecht’s investment strategy is what many would call very aggressive. He favors sector funds and developing-market funds—such as those with respective focuses on Latin America, the Middle East, and Asia. More than half his assets are outside the U.S. And within the U.S., he owns interests in three Midwestern ethanol plants. Over 90% of his investment portfolio are these ethanol plants and in the mentioned types of stock funds.

Interestingly, the Kiplinger’s article sought to address Albrecht’s question as to whether his seemingly aggressive investment mix is likely to hold up in a recession—and more generally for his retirement. If you had asked me ahead of time, I would have probably guessed the magazine would recommend paring back some on his international exposure and increasing his proportion in what many would call more conservative investments. But Kiplinger’s concluded that, with Albrecht’s ability to sit tight with his investments for maybe 3-5 years before having to tap them, his mix was “just fine.”

For the full read, see “His Risky Picks are Doing Just Fine” in the May 2008 issue of Kiplinger’s.

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