There is a remarkable story in the Boston Globe about how a man named Robert Morin worked for 50 years as a librarian for the University of New Hampshire and bequeathed his savings of $4 million to the university upon his death at age 77.
“He would have some Fritos and a Coke for breakfast, a quick cheese sandwich at the library, and at home would have a frozen dinner because the only thing he had to work with was a microwave,” his financial advisor Edward Mullen said. “He was a very unusual gentleman.”
-The Boston Globe
Despite the fact that his final salary in 2014 was $102,200, according to the Nashua Telegraph, he drove a 1992 Plymouth, never bought new clothes, and passed his spare time reading library books.
But something didn’t add up in my mind. If his diet was limited to Fritos and cheese sandwiches and he was driving a hooptie, where the f*** is the rest of the money???
I did the math to figure it out.
- Starting salary in 1964: $23,266
- Annual raise: 3%
- Final salary in 2014 $102,220
- Average income tax rate + FICA: 25%
- Average capital gains/dividend tax rate: 15%
- Savings rate post-tax: 50%
- Asset allocation: 60% stocks, 40% bonds
Estimated final account value upon death: $10.8M
Where did the other $6.8M go?! Something tells me a guy who eats cheese sandwiches at his desk and driving a ’92 Plymouth wasn’t blowing his paycheck on hookers in Vegas. Look no further than Mr. Morin’s financial advisor, the guy calling his client “an unusual guy” in his interview with the Boston Globe.
If his financial advisor took 1% annually, the mutual fund companies took another 1% annually, and their churning and active management triggered another 1% in capital gains taxes, then voila! When I included these fees, kickbacks, and taxes, he is indeed only left with $4M. See this prior blog post to see the math.
Perhaps, instead, they sold him mutual funds with 5.75% loads. Perhaps they sold him mutual funds with higher expense ratios of 1.5%. Perhaps they charged him higher advisory fees of 2%. We will never know, but I do know that he only got to keep a small fraction of what he deserved in exchange for leading a monastic lifestyle.
I never get tired of watching this hilarious demonstration of how two-thirds of your savings can end up lost to the financial industry in this mind-blowing segment by John Oliver. UNH librarian Robert Morin got crushed by a giant domino.