Yesterday’s link to the article about people not saving for retirement, brought back the following memory.
I remember back when I was in high school, my dad telling me about how my cousin had withdrawn something like $30,000 out of her Walmart retirement account in order to buy a new car. I know new car prices were nowhere near $30,000 back then so I’m not sure why she took out so much unless she just cashed out. Anyway, based on 20% withholding and a 10% penalty (I believe both existed back then), she would have lost $9,000 right off the top. Then, she would have spent approximately $13,000 on a Thunderbird.
I don’t have the exact numbers or dates but let’s just assume she withdrew this money on January 2, 1987. The split adjusted price of Walmart on that day was $2.27 a share, which means she would have sold 13,215 shares.
Fast forward to Tuesday, May 15, 2012. Walmart is trading at around $59 a share.
Multiply 13,215 by $59 and you get…
I’m pretty sure she’s not still driving that Thunderbird.
Of course I made a lot of assumptions here. I assumed that the entire amount withdrawn would have stayed in Walmart stock the entire 25 years. And, there was no guarantee that Walmart’s stock would have performed that well over the years. It also would have been risky to keep all her money in Walmart stock (it should have been diversified, which would have most assuredly meant lower returns).
All that said, I seriously doubt my cousin did the math. Instead she went with her heart and bought a new car.