After World War I, He Took A Job With A Parcel Delivery Company. He Bought Company Stock Every Year. He Retired From UPS In 1952 And Said He Never Made More Than $14,000 A Year. 39 Years Later Theodore Johnson’s Fortune Was An Estimated $70 Million
Theodore Johnson built a fortune on a modest salary with one simple habit, but the same strategy has wrecked workers at Enron and Lehman. Here is what his story teaches, and the danger hidden inside it.
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Theodore R. Johnson said he “never made more than $14,000 a year as a vice president at U.P.S., from which he retired in 1952.” In October 1991, Education Week put his personal fortune at an estimated $70 million. He built that gap over a working life and the 39 years between his retirement and that Education Week estimate, and he did it with one practice: buying his employer’s stock year after year.
Personal finance writers love his story because it shows that owning things and giving them time can matter more than salary. It also carries a risk that has ruined other workers who did the same thing.
From World War I Gunnery Officer to UPS Vice President
The National Center for Family Philanthropy says Johnson “returned from service as a gunnery officer in World War I and took a job with Merchants Parcel Delivery,” the company that became United Parcel Service (NYSE:UPS | UPS Price Prediction). According to the Johnson Scholarship Foundation, he worked his way through college, joined UPS in the early 1920s, earned an MBA at night school and rose to vice president of labor relations.
The company he joined now has about 460,000 employees, operates in more than 200 countries and territories and has a market cap of roughly $81 billion.
He Bought Shares at Every Opportunity
Education Week reported that “he said he made his fortune through annual investment in company stock.” The foundation describes the same practice: “He believed strongly in the company and bought shares of its stock at every opportunity.”
Most of that buying took place while UPS was privately held. The foundation notes that a public offering of UPS shares came later and helped the foundation grow. Johnson was collecting stock he could value mostly from the inside, as a long-time manager who knew the business well.
He was modest about the result. The foundation says he “felt that he had been lucky in life.”
A Gift Aimed at Middle-Income Students
Education Week reported that at 90, the widower set aside $36 million of his fortune to establish the Theodore R. and Vivian M. Johnson Foundation. It would fund college scholarships for Florida high-school graduates, American Indians and people with disabilities.
Education Week reported that 40% of the interest would go to Palm Beach Atlantic College and 20% to need-based scholarships for children of UPS’s Florida employees. Per Education Week, 10% each would go to four more recipients:
- The American Indian College Fund, supporting American Indian students
- Gallaudet University, supporting students with disabilities
- The Florida School for the Deaf and Blind, supporting disabled Florida students
- A scholarship fund for disabled Florida children
Theodore R. Johnson said he hoped to help middle-income families and that eventually 500 to 1,000 students a year could each receive between $500 and $5,000. He called education “the most important thing a child can have in life.”
What His Foundation Grew Into After 1993
The foundation says Johnson died in 1993 and his son took over him as president. “Aided by a public offering of UPS shares, the Foundation’s resources tripled between 1993 and 1999,” the foundation says. A National Center for Family Philanthropy profile from 2007 put the Johnson Scholarship Foundation at $140 million, with more than $44 million in scholarship support distributed. Today the foundation describes its mission as “to help people prepare for and obtain a college degree.”
What Johnson’s Story Teaches About Employer Stock
One lesson holds up well. Buying steadily for decades can do far more than a modest salary ever could. Owning shares and holding them for decades is what made Johnson rich.
Concentration is the harder lesson. Johnson’s paycheck, savings and estate all depended on one company, and that company kept growing. Workers at Enron, Lehman Brothers and Sears made the same choice and saw their jobs and savings shrink together. Strong companies stumble too: UPS shares fell about 32% over the past five years, even after a 27% gain over the past year.
For today’s employees, the first question is how much of your net worth sits in your employer’s stock. If it’s more than a small piece, gradual rebalancing as retirement approaches is worth exploring. If highly appreciated employer shares sit inside your 401(k), learn the net unrealized appreciation rules in 26 U.S.C. § 402(e)(4) before you roll anything over. They can let that growth be taxed at long-term capital gains rates instead of as ordinary income. Rolling the shares into an IRA gives up that option for good (one of several quiet IRS rules we charted in a free guide to retirement tax traps), and that one-time choice is a good reason to hire a fee-only advisor.
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AJ spent 10 years writing about financial markets at The Motley Fool. His coverage centers on technology stocks and the broader macroeconomic trends, from interest rates to geopolitics, that shape where markets are headed next. AJ is drawn to the stories where big-picture economics and individual companies collide.
