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How much do Santa's elves need to retire?


It’s December 19th and all over America physically and financially exhausted consumers are frantically scrambling from store to store and site to site trying to find that perfect last minute gift. Everywhere you go store clerks are being abused by exhausted customers demanding special attention and haggling over price.

Meanwhile in a makeshift sweatshop more than 3,000 miles away from self-absorbed New Yorkers, an army of tiny laborers is being worked to the edge of death by a corpulent task-master on a deadline. Inbred for centuries this elfin band of hyper-talented workers live in tiny huts atop a melting ice-cap and silently pray for the day they can retire to a life of relative sanity.

Thankfully Santa’s elves have ParenteBeard on their side. The accounting firm that last year calculated the cost of running Santa’s workshop has put together what they call a 401e (elf) that estimates what a typical elf would have to put away each year to live comfortably after the end of his or her toymaking career.

ParenteBeard President Jeff Ferro says his firm created its 401e plan for more than a holiday laugh. “We’re trying to get children interested in math,” Ferro explains in the attached clip. The idea is to show kids practical applications for math to demonstrate the fun side of numbers, not to mention the importance of planning.

Since it’s hard to secure interviews with Santa’s actual elves (presumably NDAs enforced by torture are involved) ParenteBeard based its calculations on numbers used in the movie "Elf."  After careful study of the film Ferro and his team used the following base assumptions:

  • Based on Buddy’s dad being “540 or 55 in human” it follows that one human year equals 9.8 elf years
  • The average elf attends trade school prior to going to starting work at 22 (215 in elf years).
  • $40,000: the average elf salary in American human dollars (based on assumptions made in the firm’s analysis of Santa’s workshop last year)
  • 75% of their annual salary: What ParenteBeard estimates an elf will need to retire
  • 6% or $2,400 a year: what elves put into their 401e’s in hopes of retiring before a repetitive stress arthritis turns their skilled hands into tiny clubs of agony
  • 5% or $2,00: Santa’s matching contribution
  • $4,400: Savings on base pay between their own contributions and Santa’s contribution
  • 373: The number of years an elf is forced to toil in his ice covered hell
  • $7,500: The annual “Cheer Bonus” Santa pays based on world-wide holiday cheer

With 373 years to work and almost no stores near the North Pole frugal elves are able to build a sizable nest egg. Their contributions from base salary and Santa’s 5% contribution would add up to more than $1.6 million by the time an elf turns 588 (60 in people years). In the unlikely event that the world-wide holiday cheer bonus averages $7,500 over the course of an elf’s career that adds another $2.8 million into the 401e.

Add it up and an industrious elf will be able to retire with more than $4.4 million in the bank to be spent on tiny green felt outfits, physical therapy and dialysis from more than 500 years of subsisting on little more than candy and bitter tears.

If an elf has a decent broker and better still puts his money into an index fund, his or her extraordinary life-span can make him/her outrageously wealthy. At a 6% annualized return putting away $1,000 per month for 373 years would result leave an elf with $567,395,770,226,570. Call it $570 trillion for the sake of simplicity. 

What would an old elf do with $570 trillion?  Anything his or her tiny heart desires. Let’s say for instance our elf, who we’ll call “E-Money” for now obvious reasons, had a pathological hatred of banks and wanted to take all of his money in $100 bills. In terms of logistics E-Money could assemble cubes of $100,000,000 piled on 5.6 million pallets weighing a total of 6.3 million tons. 

E-money could then “Make it Rain” at Scores for 600 years or build a contiguous four foot high, 3,600 mile long bridge to Washington DC and file a complaint against Santa with the National Labor Relations Bureau. 

The magic of financial compounding returns is truly a wonder.