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Who has been the most successful stock market investor as an active or retired federal employee?
We do not really know. The Thrift Savings Plan does not publish names and financial results of its investors for obvious reasons. We do know that one federal employee has accumulated more than $5 million in the TSP. We do not know if this person has spent a career as a federal employee or if he (or she) transferred money into the TSP from a private sector account.
But, in determining the most successful career federal employee as a stock market investor, one name always stands out as being near the top of any list: Anne Scheiber.
Former IRS Auditor Dies With $22 Million Estate
Miss Scheiber was raised by her mother as her father died when she was very young. She started working at jobs as a teenager and managed to graduate from college and from law school and subsequently elected to work for the Internal Revenue Service (IRS). Miss Scheiber worked for the IRS as an auditor. She never married and had very few, if any, real friends.
Her top salary at the IRS was $3,150 per year. She retired from the IRS in 1944 with a government pension of $3,100. She had saved $5,000 when she retired at 51 years old. She apparently had invested in the stock market while working for the federal government and had started investing some of her money while she still worked for the agency. She never received a promotion although she was apparently a very good worker. Being female and Jewish may have been significant factors in her lack of career advancement in the agency in that era.
After she retired, her pension was apparently enough for her to live on. She never held another job and rarely left her apartment.
When she died at 101, she still lived in the same apartment, wore the same clothes, and left $22 million dollars to Yeshiva University. She reportedly left the money to Yeshiva to help Jewish women battle the kind of discrimination she felt she had encountered during 23 years with the IRS.
How to Accumulate Wealth
An important lesson she apparently learned as an IRS auditor was that one way to become rich in America is accumulating stocks. She accumulated stocks in brand name companies she understood and then reinvested dividends for decades. She never sold her stocks so she did not have to pay taxes or commissions.
She did not have a favorable opinion of stock brokers, although her only known friends were her lawyer and her stockbroker. She reportedly read annual company reports with the same tenacity with which she audited tax returns at the IRS and she attended annual shareholders meetings.
Anne Scheiber did her own stock research. She focused on strong companies with the potential to increase earnings and pay higher dividends over time. She seldom sold her stock—including during the inevitable market downturns.
“She was never looking for a quick buck,” said William Fay, her broker at Merrill Lynch. “Her whole idea was to get performance on a long-term basis. She felt over the long run the value would grow.” She was right. It did grow.
As she grew older, she also invested in bonds. When she died, her portfolio was providing $750,000 in dividend and interest income annually.
While few people would want to follow her reclusive lifestyle and extreme frugality, federal employees do have better income than Anne Scheiber experienced as a federal employee. The national average for federal employees is $81,578 with a median salary of $76,131. In 2014, the latest data available, the average American made $46,482. That should make it easier to hit the million dollar mark before retirement.
Lessons for Investors
Federal employees have advantages and disadvantages compared to a federal employee from an earlier era.
The matching contributions from the federal government for an investor in the Thrift Savings Plan (TSP) are a big advantage. Also, with the TSP funds, a TSP investor can achieve instant diversification with several of the TSP stock funds and the annual fees are very low compared to other options.
Moreover, a TSP investor’s dividends are reinvested in the same stock funds. The C fund, for example, is based on the S&P 500, so there is a basket of stocks that provide a good investment selection for any investor. The S fund provides an option of small company stocks and the I fund adds international stocks to the mix of options.
On the other hand, buying individual stocks is not an option in the TSP. An investor who wishes to invest only in stocks that pay dividends or likely to increase dividends is out of luck.
Miss Scheiber employed a classic buy and hold strategy buying shares of solid, established companies that provide a source of revenue for their shareholders. It takes discipline to hold on to stocks during a bear market or even a downturn of less than 20%. The emotional experience of watching stock values shrink by 15% or more will often lead to a decision to cut losses and sell the remaining shares. That is understandable. Historically, it has led to less returns in the long run when the market eventually recovers.
Some readers will occasionally comment that a federal employee cannot accumulate a million dollars over a federal career because of low pay and high expenses.
As more federal employees reach the million dollar mark in their TSP accounts, it is obvious that it can be done. And, for those who are still pessimistic, remember that an IRS employee with a top salary of less than $4,000 a year ended up with $22 million.
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