Analysis of Grandfather’s 27-Year Roth IRA Investment Performance and Discussion Insights

This analysis is based on a Reddit discussion [1] where a user shared their grandfather’s 27-year Roth IRA performance. The grandfather started with $75,000 in 1998 and now holds $170,000 after annual withdrawals of $15,000–$25,000, achieving a 10.7% annualized internal rate of return (IRR). This outperforms the S&P 500’s 9.02% price-only annualized return from 1998–2025, a figure validated by internal market data [0]. Notably, the grandfather’s performance occurred during the 2000–2013 secular bear market, where many portfolios struggled due to low returns, making his ability to grow capital while withdrawing funds particularly impressive [1].

Discussion participants highlighted that advisor fees (1–2% annually) would have significantly reduced returns over time due to compounding effects. This is supported by financial principles, where even small annual fees can erode long-term gains [2]. Another key point is the non-financial benefit of mental engagement from investing, which aligns with research linking retiree mental activity to better well-being [3].

The user also raised questions about risk-adjusted returns (alpha), but without data on the portfolio’s volatility (beta) or exact holdings, alpha cannot be calculated [4]. This limits a complete assessment of whether the returns compensated for any additional risk taken.

1. Performance Context Matters
   : The 2000–2013 secular bear market (low S&P 500 returns) makes the grandfather’s performance more remarkable than if it occurred during a bull market. Withdrawing funds during downturns typically accelerates portfolio depletion, but his returns and discipline allowed growth.
2. Fees Have Disproportionate Long-Term Impact
   : The compounding effect of advisor fees would have reduced the grandfather’s net returns, emphasizing the value of low-cost or self-managed investing for long-term goals.
3. Non-Financial Benefits Are Overlooked
   : The mental engagement from investing is a critical but often ignored aspect of retirement planning. For many retirees, maintaining a purposeful activity like investing can improve mental health [3].
4. Tax Advantages Amplify Results
   : The Roth IRA’s tax-free growth and withdrawals provide a hidden benefit not factored into direct comparisons with index funds, which are typically taxable in non-retirement accounts.

• Unknown Volatility and Risk-Adjusted Returns
  : Without portfolio composition or beta data, it’s unclear if the 10.7% return compensated for higher volatility compared to the S&P 500 [4].
• Concentration Risk
  : If the portfolio was concentrated in a few stocks or sectors (e.g., technology), it may face higher risk of underperformance in future market cycles.
• Unsustainable Withdrawal Rates
  : Current annual withdrawals ($15k–$25k) represent 8.8–14.7% of the $170k portfolio, which is above the generally recommended 4% safe withdrawal rate for retirement sustainability [5].

• Active Investing Can Outperform with Discipline
  : The grandfather’s results show that self-managed investing, without high fees, can beat broad market indices over long periods, highlighting the potential value of investor knowledge and discipline.
• Holistic Retirement Planning
  : The non-financial benefit of mental engagement underscores the need for retirement plans that include both financial and well-being considerations.

This analysis examines a grandfather’s 27-year Roth IRA performance, which achieved a 10.7% annualized IRR (1998–2025) after annual withdrawals of $15k–$25k, outperforming the S&P 500’s 9.02% price-only return but trailing the Nasdaq’s 11–12% return. The performance is notable due to the 2000–2013 secular bear market, during which he withdrew funds while growing the portfolio. Advisor fees would have significantly reduced returns, and the non-financial benefit of mental engagement is a critical retirement consideration.

Information gaps include portfolio composition, exact withdrawal timing, and risk profile, which limit a complete risk-adjusted analysis. Investors should note that past performance is not indicative of future results, and sustainable withdrawal rates are important for long-term retirement planning. This analysis provides context for evaluating self-managed vs. advisor-managed retirement portfolios, emphasizing both financial and non-financial factors.