Assuming continually withdrawing 8% even during negative return years is silly. It is also silly to only withdraw 4% during high return years! Ramsey doesn't recommend that at all! He says if you are earning 12%, you can easily withdraw 8%. Nobody should set a robotic withdrawal rate at any percentage. Instead, adjust withdrawal rates based on rates of return.
Ok, but then you would need to have enough cash or liquid-able assets to cover the variations. It sounds like you’re talking about taking half the draw on bad years; and I just can’t see someone planning to retire with that much slack in the budget.
Good point, and I'll just add that as there are the other sources that come into the financial picture such as the delayed SS (which is COLA for life), any pension you might have, real estate etc., coming in during your 5th or 8th year of retirement, which allows you to decrease your 401K withdraws, as well as, factors such as your lifestyle likely slowing down from go-go to slow-go. I'm not saying that a bear market and lost decade isn't terrifying but these 30 flow sheets do need to be more sophisticated then a continual withdraw rate.
Even still, it show Dave Ramsey does not understand or if he does, he fails to in communicating any understanding of sequence of return risk. I've listened to him rant on this subject and he clearly says you can easily withdraw 8% because I make 12% a year on average. ON AVERAGE does not work in the decumulation phase. It works in the wealth accumulation phase.
What I have heard from Dave is to move enough assists to fixed return to cover down years, so you are not withdrawing on down years, on up years draw extra to replenish the fixed return pool. I have never heard Dave suggest to withdraw 8% every year regardless, very miss-stated saying this is his plan.
Watching my parents age and develop health and cognitive issues at 80, the cost in the last 8 years of life sky rocketed for home health care and in the final year care facilities Fortunately my father planned well so his children were not significantly burdened with the cost
IF I hit 80, hopefully I spent all my money and lived a good life. If the same situation happens to me, the Government can step in and house me on taxpayers dime.
There is one exception to the 4% rule not working : If you are a NY State or City public employee/civil servant(cop, fire, EMT, Corrections, Sanitation etc) you have a 403b with a NY constitutionally guaranteed option of 8.25%(NYC teachers get 7% on a terrible contractual deal a few years ago but the rest of the state and administrators get the 8.25%) no matter what the market does. You can take 4% every year and still build up your 403b to outpace inflation.
The 4% rule is a great starting point. I created a spreadsheet that automatically adjusts how much I can take out depending on my current balance. I have 1 year of savings in a t-bill ladder that covers my expenses minus what I receive from SS. I also use the 3-bucket strategy between my retirement, brokerage and savings/treasury accounts.
Im 67 years old collecting social security and working full time because i can. I work 3 12hr days. My income allows me to continue to contribute 22% into my 401k. My feelings are to continue working and in time part time if needed. It motivates me to be able to support financially my adult kids if needed (4). I appreciate vacations more with my wife. I enjoy interaction with work mates. The thing is this works for me and i accept it. We're all different and seek our own view of paradise. Planning is imperative in life but the unforeseen or just plain bad luck do happen. I dont stress financially, im kept active and i feel productive.
Dave gave 8% as example of how you would withdraw your money. If some year it return less, then withdraw less. He hates the 4% rule because people would leave too much money behind and not enjoy their retirement.
Please do not listen to Dave Ramsey on this subject. His advice is a joke and dangerous for people like you who try to rationalize it because of who he is. Even with your explanation 8% withdrawal is horrible advice.
Ben Felix pointed out in a recent RUclips short that Dave Ramsey computes average returns wrong. He uses the arithmetic average instead of the geometric average (which is the annualized return). Here's an overly simplified example: 1. The wrong way: Start with $100. The first year, you gain 5%. The second year, you lose 5%. The arithmetic average return is (5% + -5%) / 2 = 0%. So you would be left with your original $100. 2. The right way: Start with $100. The first year, you gain 5%. The second year, you lose 5%. The geometric average return is 1.05 * 0.95 = 0.9975. So you would be left with 100 * 0.9975 = $99.75. It's a small discrepancy in this example, but it's enough to show that his math is wrong and, if your math is wrong, your conclusions can't be trusted. ruclips.net/user/shortsz2cOEbFYLsA
@@cc8751 Ya, ok. I grew up trailer trash. I went on to get a post graduate education. I was on television much of the 90s. Lived on the Pacific Ocean in Laguna Beach. Lost everything in 2005. This loss was, in part, a result of my convervative Christian beliefs. I became a tax advisor and was able to set aside 7 figures for my retirement by 2019. Bottom line, I'm not broke.
It's a generalization, not to be taken literally. Unfortunately, people aren't taking accountability for their own Planning. It has to be taken into account day by day, week by week and month by month. Hence the you snooze you lose saying that we all have heard before.
My plan to start is to use the 4% but don’t increase for inflation for future years. My wife and I will have SS and State pensions. Time will tell if that works. Adjust as needed.
The 4% strategy stipulates a 50-50 investment split between stocks and bonds, re-balanced yearly. It includes a provision for yearly inflation. It's design is supposed to be one of the most conservative retirement strategies, virtually guaranteeing success over a 30 year retirement period. Your 4% plan with NO INCREASE FOR INFLATION would be extraordinarily conservative.
Yours is the first video to mention the variable of taxes owed on withdrawals. The percent taken from a Roth will be considerably less to equal a traditional IRA/401K due to taxes being owed.
I believe drawing from you investments whether 4% or 8% or in between, should be governed by the markets. If the markets are down, you draw less and tighten your expenses. If the markets are up, you can draw down more. Both my wife and I are retired. We both have pensions, IRA/401Ks and savings accounts. She is already drawing SS and I will draw my full SS next year. Our house and cars are paid for. We have never drawn from our IRA/401Ks and don't plan to unless there is an emergency that our savings won't cover. So it keeps growing. Plan your retirement early and get those high expenses paid off.
Bengan's 4% Rule study is all about sequence of returns risk-that's exaclty what he back tested for! He sought to find the largest SWR (adjusted for inflation) that will work with all the 30 year periods in the data set with the asset allocations he used. His answer was 4.3% and takes into account all the sequence of return possibilities in the data. Most of Ramseys investing advice is questionable at best. I wonder if he gets a fee from his Endorsed Providers...follow the money. "Money Doesn't Grow on Fees".
Ramsey DOES get fees from his Endorsed Providers...they pay him a fee for every referral he sends to them. He claims that they are thoroughly vetted but does not go through any specifics on his website. My guess is that the vetting that is done is minimal at best.
What if you put 1 million in covered call ETF like JEPQ and lived on the 9% dividend (paid monthly) never selling off shares and put the other million in VTI or VOO and let it grow (theoretically it should be 2 million in 8 years)? When you need more income due to inflation or changing lifestyle, sell some VOO or VTI and buy more JEPQ for a larger monthly dividend. Never selling off the goose that is laying the golden eggs. Is this a realistic strategy or flawed?
I agree with what you are saying about Ramsey and Orman but less than 3% retire with over 1 million and you use a 2 million example. Rather see an example closer to the median retiree.
Well explained. Thank you for bringing up this video. Financial education is indeed required for more than 70% of the society in the country, as very few are literate on the subject. Thanks to Caroline Suzan Olson, the lady you recommended.
What happens when you need a new roof or HVAC system? You might need to pull a lot out at one time and make it up by not withdrawing any money the following year.
You need to update to the latest updates on the Trinity study that shows 5% is the new 4%... You also ignore large portfolios that can absorb some downturn and mitigating strategies such as Bucket and Guardrails... It is the trap I see that all the CFP cling to the 4% rule as absolute instead of a rule of thumb and ignore the things that can actually mitigate risks such as Sequence of risk..
It's not that it's set in stone, it's just a good starting point. And people with larger portfolios that can handle bigger drawdowns are more likely to have a financial advisor managing their accounts or at least providing advice.
Hello, new subscriber. I've seen small niche youtubers do this but never CFPs such as yourself. What about never having to sell stock to live? Can you live off of interest, dividends, ss, and pensions and you dont have to worry about sequence of returns risk, recessions, etc? Yes, I know companies can cut dividends but aristocrats and diversification can lessen that risk. Can you do a scenario like that?
Dividends are how we are retiring. The 4% is dumb and the fix mortgage she used is ignorant as well. I have a fixed mortgage bit payment increases because taxes and insurance in the home goes up over the years with inflation. The more and more I watch cfa etc I understand I need to focus on DYI. I do use cfa for information but some things they definitely overlook.
Actually, it makes sense because you're talking about bond funds, and I'm talking about a combination of individual and bond funds. Thanks for watching!
Great video! *subscribed* . Too many people think Dave Ramsey and others like him are “Gods” when it comes to investing and saving. I’m glad more professionals like you are on RUclips correcting these issues. I’m not really planning on inflation too much, I mean during my working years, companies barely give raises to cover inflation and for a long time stretch. So if I can live nicely on that now, I’m not going to keep increasing just because of inflation. Granted I see why you want to, don’t get me wrong but the honest question here is “Can I live off this amount this year? What do I want to do this year and how much will it cost me? Is it necessary?” Plus at the rate I’m going, I will be getting 35k a year from social security retiring at 62 (not counting my wife’s). So annuities really make a big difference in the calculation.
She did, in a way. She talked about long-term care needs, which is the financial planning way of talking about money for chronic medical care in old age, including assisted/memory/hospice care.
One thing none of these scenarios / discussions usually bring in to this is adjustments. So someone is planning on a X% rule and will take $100K per year and should be fine. But then the market crashes early in their retirement... Wouldn't they just take less money our of their retirement for a bit? I don't even mean people who have a huge emergency fund to weather it, but just being frugal. If the market crashes, instead of taking out $100K, they scale back and take out $80K till the market starts to recover. They decide to eat out less, cut back to slower internet, one streaming service, and maybe that European vacation can wait a year or two? The scenarios always assume the people just blindly keep taking out the same amount of money. I don't think that's realistic. I'd love it if these scenarios could take into account some scale back for those worst case scenarios since they are including those worst case scenarios as possibilities...
If you build your portfolio out of securities that, first year, are yielding you just over 4% with a history of increasing their dividends at a rate faster than inflation then market corrections or flat markets won't matter as you never have to sell shares to get the income that you targeted. For example - from 2005 to 2012 Johnson & Johnson's price went nowhere, literally lost value due to inflation. Was right around $69 in spring 2005 and by Nov 2012 it was back to...$69 per share, meaning after inflation your break-even was still a loss IF you are looking at price only. However, if JNJ was part of an income generating portfolio, the dividends for JNJ from 2005 to 2012 grew each year by an average of 10.3% per year, far exceeding the inflation rate. In 2005 your JNJ dividend was $0.285 per share per quarter and by the end of 2012 your dividend was $0.61 per share per quarter, or nearly 114% higher. Now, if you have a portfolio that isn't kicking out as much as you need to spend that then requires you to sell a few shares each year to bridge the gap, that is how you can get into trouble or even run out of money. Imagine having a portfolio that was just the S&P500 from 2000 to 2010 where the market went nowhere. Well since the S&P500 typically pays out around 2%, in a flat or falling market that means you have to sell more and more shares in order to keep up with inflation and that can doom a portfolio. 4% rule is fine but one should start right at or real close to 4% on their initial starting yield with a portfolio, that when all averaged together, has a history of raising dividends faster than inflation overtime so you can past the point of needing to ever sell shares (less you already started above that point) going forward.
@@mjs28s Your example of J&J dividends is probably not a good example in that even in 2012 after a 114% increase it was still only a 3.5 % return on investment (2.44/69 = 3.5%)..
Hi Julia, When we talked a couple of months ago you mentioned that you were looking to get licensed in California. Has that happened yet? If not, when do you anticipate us being able to work with your firm and have our current plan evaluated?
Absolutely plan for the future and consider old age (if you make it) but don’t spend your entire life based on a possible few last years spent in a nursing home.
Buy high quality bonds with YTW at 5.5% Tons of them. Spend 4% and reinvest the remaining 1.5%. Adjust yearly at 3% inflation and you are good for 20 years (65->85), starting amount untouched. You will need less after and starting amount will go the heirs. Yes, inflation will reduce principal burying power but still nice amount for children. No need to worry about SP500 volatility, which likely will only return 3% (with dividends) in the next 10 years according to MS, JPM and GS.
It's also a lie to assume you will spend the same amount, plus 3% compounded every year, for the rest of your life. Data shows folks spending more in the early years of retirement, slow down spending in the middle year, and up again at the end due to medical expenses.
Correlation does not mean causation. Think about it, the reason spending slows down is they over spent in the first years and need to make cutbacks in there life to survive.
I am shocked that people don’t recognize that Dave Ramsey has different assumptions which lead to different numbers. The 4% rule assumes a mixture of stocks and bonds. Dave Ramsey is assuming investment in an equity mutual fund. The 4% rule has a low percentage because the plan is to increase withdrawal based on inflation. Ramsey’s advice is to take 8% every year irrespective of inflation. Many people will prefer the 4% rule. Others will like Ramsey’s approach. Comparing them is an “apples to oranges” comparison. It is dishonest to present it in any other way.
"Ramsey’s advice is to take 8% every year irrespective of inflation." 8% of what ? The balance at the start of retirement ? Of the balance at the beginning or end of each year ? Something else ? Has he ever been clear on this point ?
Have you had any clients who have sold everything to live abroad in retirement or even early retirement? I see all these videos on how you can live very comfortably abroad for 2-3K a month and am trying to figure out if it is even realistic or what is realistic to retire early in our mid-to late 50s to live abroad and still have enough to possibly return to the US later when health declines. Would love to see one of your videos of this type of analysis.
The stock market and financial institutions want to hold as much of your money as they can, Sure worst case you could be stuck in assisted living for a long time. This kind of care is very expensive, probably to expensive and not the ideal way to live, you are not getting what you pay for in terms of really living. These places can be sad and disgusting. If you fail to retire at all and never end up using your investments what good are they to you? You need to retire while you can still enjoy the life you have left. Better investing might be investing in your health.
I retired early in 1999 with $10 million. 25 years later with a family of four and a comfortable but not extravagant lifestyle, I have a net worth of $10 million. I have essentially followed the 4% rule although inflation and children’s education has increased withdrawals the past five years or so.
Quibbling about 11.47 not being 12 isn't really a "gotcha" in my book, and I've not heard of the "plus inflation" qualifier. That, and 4 percent or 8 percent isn't a plan. It's a guideline. Using the word "lies" to describe this is a bit disingenuous itself. I'd also argue that the last 50 years is a more accurate portrayal of the market than the last century. Many of the guardrails that exist today did not exist 100 or 90 years ago, nor did the index funds that Ramsey suggests. And if you're expecting your last decade to be the lowest spending, good luck with that. Those "no go" years are the assisted living and long term care years which will burn through faster than any other year without a catastrophic event.
I liked Suze Orman until she said that "5 million" thing. At that point, I decided she was out of touch with her viewers. She has a net worth of 75 million, so I'm guessing her lifestyle is a bit more extravagant than people think. The rest of us don't need 5 million to retire.
Dave has gone on record stating he has no intention of retiring and things the concept of retirement is dumb. It's no wonder he gives awful retirement advise. He literally admits to not understanding it at it's core.
As you speak about Dave Ramsey exaggerating, you claim that 10.69% is almost 2% less that 12% on the 100 year average of the S&P. Are we using exact numbers or not???
I would like a stress free retirement with guaranteed income and money growing in the market.. a combination of both. Hope to set up a consultation soon.
Although I agree that the 8% suggested by Ramsey is aggressive, the 4% rule is clearly an Investment industry number that benefits the big Investment houses and fund managers. The goal is not to die with a million dollars, the goal is to die with enough to cover your funeral expenses and maybe the legal cost of your family taking ownership of your real property. Also, I never get the 30 year time from for Monte Carlo Scenarios. If you are 60 when you retire, if you use a 30 year time frame - that gets you to 90 and the stats just don't support the likelihood of you living that long (not even 5% of the population makes it to 90) - The truth likes in the middle - personally I am shooting for a 6.5% withdraw rate over a span of 25 years when I reach age 58. Totally realistic sweet spot in my opinion.
If you invest smart you definitely could do 8 percent withdrawal. But most have it in a 401k and money managers only gets you 7 percent per year. But put 100 percent of you money in voo with its low fee. You get 12 percent average every year. Makes a huge difference.
Um....what does that even mean? That is what I spend and I have my portfolio set-up such that the dividend income stream increases faster than inflation and a bit more than 4% comes in, meaning that I also reinvest a little of the income stream which then allows my lifestyle to improve more and more each year above inflation. Didn't take a financial advisor to set that up. Kids - who says they are getting the estate? Charity my friend The world is more than the options that you seem to think are available.
@@johnspelman8976 If that is what you mean then try communicating so you have clarity in what you say rather than creating more questions. But, you still never addressed the questions you actually cause from your statement. Why will a financial advisor love it when it doesn't require one do to this? Why will your kids love it as they aren't automatically going to get your money when you die nor are they entitled to. Can't you see yet how what you said makes no sense? But ok, I am sure you can figure it out from here. Oy
Why do planners always default to a 30 year retirement? Most people won’t live that long. If you only have a 15 year retirement then the 8% rule is not that crazy. A good financial planner will factor that into the analysis and not mindlessly put in 95 for everyone.
Because you can’t get money back if you live longer. You plan for the best case scenario dummy. By your logic we shouldn’t plan at all because you can die the day after you retire.
Lady you are trying to be ridged with these concepts. They are just concepts not absolutes. I worked with several CFP's and they all... SUCK.. They all want 2% commission and not one projected more that 14%. Im at 92% this year alone.. Tech stocks are rocking it.. and if you are in them for the next 5 years.. expect to have high gains. I think every CFP is just stuck in old stock history and do not understand what is happening in the real tech world. you do your thing, I think I will stick with mine.
Retiring at 65, you will rarely live 30 years. 20 years is pushing it. Plus, Debt does not flow down to your children. If you are married open separate credit card accounts and have all of your assets in a trust. It's tough to collect money from anyone let alone an elderly person. Remember, there are no Debtor's Prisons anymore. lol
You should be more careful in what you've assumed. Dave Ramsey never suggests putting all money into sp500 index funds, like you've stated. He says to put your money into 4 different baskets of stock mutual funds. This doesn't really matter for arguments sake, as the 8% rule is definitely crazy. But any Dave Ramsey fan could stop listening once you've stated something factually incorrect. Which would be a shame, because the 8% rule seems like it could really get someone hurt badly.
Both Dave and Suzzy are completely off base with their strategies. Dave, you’re gonna be living in a box later in life and Suzzy would have you working till you die. Retirement is extremely personal and it must be tailored to you, not some general hack advice.
Susie is an amazing influence for all women all over the internet. But she’s a bad bad woman. How dare she mislead us lemmings. But I agree with her notion to not leave money to your kids. Spoiler….… this is a software commercial. We are such lemmings.😔
Dave Ramsey did not say it was an 8% rule, he used 8% as an example. What he said is that you have the freedom to adjust your withdraw rate based on the market. Bengen who developed the 4% rule has even stated that is a suggestion. Further studies have shown that with the 4% rule majority of retirees actually increased their holdings while in retirement after 20 years. The whole point Ramsey was making was that it's not a rule but a suggestion.
Big Dave Ramsey fan here. While 8% is a little much for retirement, in my opinion. I think that there are a LOT more people now who will be able to retire with dignity! We personally plan with the 4%, as well as assuming that we'll receive $0 from social insecurity. I think you brought up a lot of good points! I love watching different perspectives on retirement! 🙂
Should you be a "fan" of any adviser? And why do you assume you'll receive nothing from Social Security? You can retire with dignity on 4% if you've planned well, can't you?
@@jps0117 I love understanding different perspectives. Especially since I have a lot to learn still, learning from others will absolutely help me long term. That said, I also have mentors in different aspects of my life. Not planning for SS is making me save more. So if I do receive some, great! But what if I don't? Or it is greatly reduced? I don't like to rely on anyone, especially the government!! So if I have enough for retirement and can comfortably live on 4%, yeah, i'll be a happy camper.
-_- when people like this pull crap out their butthole and blah blah blah. Dave doesn't have an 8% withdraw rule. He said 8% withdraw is still okay if you really want to, given that the market returns 10-12% on average, which means, at 8% you probable won't go broke in retirement. Its not a rule, its a suggestion that 8% is possible.
I guess you don’t have to know math and statistical modeling to be a CFP. The 4% rule is based on a simplified statistical model and it doesn’t account for every single thing the could happen to a person on his path to retirement. Those factors are impossible to add to the model because because we don’t have a crystal ball to predict the future. It might be a flawed model because of what you pointed out but it’s the best model that we’ve got and it’s been vetted by a lot of very smart people. I’d recommend you pull down this video because although you look good but you sound very ignorant. Ever wonder why you’re the only person on YT who object about the 4% rule?
LOL. I think you should go take a cold plunge or do some deep breathing to calm yourself. Before you take time out of your busy day, make sure you actually watch the whole video.
![Noob To Max With DRAGON REWORK In Blox Fruits [FULL MOVIE]](http://i.ytimg.com/vi/LnBMOinoOvA/mqdefault.jpg)
Assuming continually withdrawing 8% even during negative return years is silly. It is also silly to only withdraw 4% during high return years! Ramsey doesn't recommend that at all! He says if you are earning 12%, you can easily withdraw 8%. Nobody should set a robotic withdrawal rate at any percentage. Instead, adjust withdrawal rates based on rates of return.
Ok, but then you would need to have enough cash or liquid-able assets to cover the variations. It sounds like you’re talking about taking half the draw on bad years; and I just can’t see someone planning to retire with that much slack in the budget.
Good point, and I'll just add that as there are the other sources that come into the financial picture such as the delayed SS (which is COLA for life), any pension you might have, real estate etc., coming in during your 5th or 8th year of retirement, which allows you to decrease your 401K withdraws, as well as, factors such as your lifestyle likely slowing down from go-go to slow-go.
I'm not saying that a bear market and lost decade isn't terrifying but these 30 flow sheets do need to be more sophisticated then a continual withdraw rate.
Even still, it show Dave Ramsey does not understand or if he does, he fails to in communicating any understanding of sequence of return risk. I've listened to him rant on this subject and he clearly says you can easily withdraw 8% because I make 12% a year on average. ON AVERAGE does not work in the decumulation phase. It works in the wealth accumulation phase.
What I have heard from Dave is to move enough assists to fixed return to cover down years, so you are not withdrawing on down years, on up years draw extra to replenish the fixed return pool. I have never heard Dave suggest to withdraw 8% every year regardless, very miss-stated saying this is his plan.
Watching my parents age and develop health and cognitive issues at 80, the cost in the last 8 years of life sky rocketed for home health care and in the final year care facilities
Fortunately my father planned well so his children were not significantly burdened with the cost
IF I hit 80, hopefully I spent all my money and lived a good life. If the same situation happens to me, the Government can step in and house me on taxpayers dime.
Dave Ramsey has no problem taking lots of risk with YOUR money...
There is one exception to the 4% rule not working : If you are a NY State or City public employee/civil servant(cop, fire, EMT, Corrections, Sanitation etc) you have a 403b with a NY constitutionally guaranteed option of 8.25%(NYC teachers get 7% on a terrible contractual deal a few years ago but the rest of the state and administrators get the 8.25%) no matter what the market does. You can take 4% every year and still build up your 403b to outpace inflation.
That's AWESOME. Thanks for sharing.
The 4% rule is a great starting point. I created a spreadsheet that automatically adjusts how much I can take out depending on my current balance. I have 1 year of savings in a t-bill ladder that covers my expenses minus what I receive from SS. I also use the 3-bucket strategy between my retirement, brokerage and savings/treasury accounts.
Im 67 years old collecting social security and working full time because i can. I work 3 12hr days. My income allows me to continue to contribute 22% into my 401k. My feelings are to continue working and in time part time if needed. It motivates me to be able to support financially my adult kids if needed (4). I appreciate vacations more with my wife. I enjoy interaction with work mates. The thing is this works for me and i accept it. We're all different and seek our own view of paradise. Planning is imperative in life but the unforeseen or just plain bad luck do happen. I dont stress financially, im kept active and i feel productive.
Dave gave 8% as example of how you would withdraw your money. If some year it return less, then withdraw less. He hates the 4% rule because people would leave too much money behind and not enjoy their retirement.
Better than his strategy to be homeless and broke in your 70s! Completely irresponsible!
Which is worse? Leaving some money behind for your loved ones or going bankrupt because you ignored sequence of returns risk?
Please do not listen to Dave Ramsey on this subject. His advice is a joke and dangerous for people like you who try to rationalize it because of who he is. Even with your explanation 8% withdrawal is horrible advice.
Ben Felix pointed out in a recent RUclips short that Dave Ramsey computes average returns wrong. He uses the arithmetic average instead of the geometric average (which is the annualized return). Here's an overly simplified example:
1. The wrong way: Start with $100. The first year, you gain 5%. The second year, you lose 5%. The arithmetic average return is (5% + -5%) / 2 = 0%. So you would be left with your original $100.
2. The right way: Start with $100. The first year, you gain 5%. The second year, you lose 5%. The geometric average return is 1.05 * 0.95 = 0.9975. So you would be left with 100 * 0.9975 = $99.75.
It's a small discrepancy in this example, but it's enough to show that his math is wrong and, if your math is wrong, your conclusions can't be trusted.
ruclips.net/user/shortsz2cOEbFYLsA
Ramsey is a one size fits all carnival barker.
You sound broke
@@cc8751 Ya, ok. I grew up trailer trash. I went on to get a post graduate education. I was on television much of the 90s. Lived on the Pacific Ocean in Laguna Beach. Lost everything in 2005. This loss was, in part, a result of my convervative Christian beliefs. I became a tax advisor and was able to set aside 7 figures for my retirement by 2019. Bottom line, I'm not broke.
It's a generalization, not to be taken literally. Unfortunately, people aren't taking accountability for their own Planning. It has to be taken into account day by day, week by week and month by month. Hence the you snooze you lose saying that we all have heard before.
Use the flexible 4% rule. The basic 4% rule is just an approximation to give folks an “idea”.
Sounds like you're talking about a guard rail strategy.
Awesome info, Julia!
My plan to start is to use the 4% but don’t increase for inflation for future years. My wife and I will have SS and State pensions. Time will tell if that works. Adjust as needed.
That's my strategy as well.
The 4% strategy stipulates a 50-50 investment split between stocks and bonds, re-balanced yearly. It includes a provision for yearly inflation. It's design is supposed to be one of the most conservative retirement strategies, virtually guaranteeing success over a 30 year retirement period.
Your 4% plan with NO INCREASE FOR INFLATION would be extraordinarily conservative.
Yours is the first video to mention the variable of taxes owed on withdrawals. The percent taken from a Roth will be considerably less to equal a traditional IRA/401K due to taxes being owed.
Health costs are the wild card. All discussions use “an average cost” but how do you realistically account for it?
I believe drawing from you investments whether 4% or 8% or in between, should be governed by the markets. If the markets are down, you draw less and tighten your expenses. If the markets are up, you can draw down more. Both my wife and I are retired. We both have pensions, IRA/401Ks and savings accounts. She is already drawing SS and I will draw my full SS next year. Our house and cars are paid for. We have never drawn from our IRA/401Ks and don't plan to unless there is an emergency that our savings won't cover. So it keeps growing. Plan your retirement early and get those high expenses paid off.
Excellent info as usual!
Yeah need 2M to retire who would have guessed.
Excellent video, Julia. Thank you for addressing this important topic.
Bengan's 4% Rule study is all about sequence of returns risk-that's exaclty what he back tested for! He sought to find the largest SWR (adjusted for inflation) that will work with all the 30 year periods in the data set with the asset allocations he used. His answer was 4.3% and takes into account all the sequence of return possibilities in the data. Most of Ramseys investing advice is questionable at best. I wonder if he gets a fee from his Endorsed Providers...follow the money. "Money Doesn't Grow on Fees".
Ramsey DOES get fees from his Endorsed Providers...they pay him a fee for every referral he sends to them. He claims that they are thoroughly vetted but does not go through any specifics on his website. My guess is that the vetting that is done is minimal at best.
Fantastic video. Thank you!
Thanks so much for watching!!
This is truly an excellent analysis , fantastic approach and information breakdown. This was VERY helpful !
What if you put 1 million in covered call ETF like JEPQ and lived on the 9% dividend (paid monthly) never selling off shares and put the other million in VTI or VOO and let it grow (theoretically it should be 2 million in 8 years)? When you need more income due to inflation or changing lifestyle, sell some VOO or VTI and buy more JEPQ for a larger monthly dividend. Never selling off the goose that is laying the golden eggs.
Is this a realistic strategy or flawed?
I agree with what you are saying about Ramsey and Orman but less than 3% retire with over 1 million and you use a 2 million example. Rather see an example closer to the median retiree.
Great episode, keep it up
Well explained. Thank you for bringing up this video. Financial education is indeed required for more than 70% of the society in the country, as very few are literate on the subject. Thanks to Caroline Suzan Olson, the lady you recommended.
Good presentation
What happens when you need a new roof or HVAC system? You might need to pull a lot out at one time and make it up by not withdrawing any money the following year.
Awesome presentation!
I followed Dave’s advice for my HSA a few years ago. My return is 30%. So 12% may not be off the table.
Again, it's not a reliable long-term average.
LOL, SURE.
I always ask financial advisors if they are so smart then why are they still having to work, especially the older ones.
Dave is not a financial person, he’s a entertainer, that’s why he’s not liable
He's great for debt, but after that, I follow the Money Guy Show for wealth generation
Like Faux News propagandists Hannity, Ingram and Tucker.
💯 It's kind of like Fox News is not news, it's just entertainment.
@@jimknarr completely different, CNN and all the others yes
Has Ramsey ever admitted his error and apologized for his foolhardiness? I didn't think so.
You need to update to the latest updates on the Trinity study that shows 5% is the new 4%... You also ignore large portfolios that can absorb some downturn and mitigating strategies such as Bucket and Guardrails... It is the trap I see that all the CFP cling to the 4% rule as absolute instead of a rule of thumb and ignore the things that can actually mitigate risks such as Sequence of risk..
It's not that it's set in stone, it's just a good starting point. And people with larger portfolios that can handle bigger drawdowns are more likely to have a financial advisor managing their accounts or at least providing advice.
Hello, new subscriber. I've seen small niche youtubers do this but never CFPs such as yourself. What about never having to sell stock to live? Can you live off of interest, dividends, ss, and pensions and you dont have to worry about sequence of returns risk, recessions, etc? Yes, I know companies can cut dividends but aristocrats and diversification can lessen that risk. Can you do a scenario like that?
Dividends are how we are retiring. The 4% is dumb and the fix mortgage she used is ignorant as well. I have a fixed mortgage bit payment increases because taxes and insurance in the home goes up over the years with inflation. The more and more I watch cfa etc I understand I need to focus on DYI. I do use cfa for information but some things they definitely overlook.
8:50 that makes no sense since bonds are return-free risk. 2022 bonds and stocks tanked together so the are not necessarily uncorrelated.
Actually, it makes sense because you're talking about bond funds, and I'm talking about a combination of individual and bond funds. Thanks for watching!
Great video! *subscribed* . Too many people think Dave Ramsey and others like him are “Gods” when it comes to investing and saving. I’m glad more professionals like you are on RUclips correcting these issues.
I’m not really planning on inflation too much, I mean during my working years, companies barely give raises to cover inflation and for a long time stretch. So if I can live nicely on that now, I’m not going to keep increasing just because of inflation. Granted I see why you want to, don’t get me wrong but the honest question here is “Can I live off this amount this year? What do I want to do this year and how much will it cost me? Is it necessary?” Plus at the rate I’m going, I will be getting 35k a year from social security retiring at 62 (not counting my wife’s). So annuities really make a big difference in the calculation.
She did not mentioned higher medical expenses in the no-go years.
She did, in a way. She talked about long-term care needs, which is the financial planning way of talking about money for chronic medical care in old age, including assisted/memory/hospice care.
I know how to predict when the market will go down, when I buy the market, it will go down. If I hold, cash, the market goes up.
One thing none of these scenarios / discussions usually bring in to this is adjustments.
So someone is planning on a X% rule and will take $100K per year and should be fine.
But then the market crashes early in their retirement...
Wouldn't they just take less money our of their retirement for a bit?
I don't even mean people who have a huge emergency fund to weather it, but just being frugal.
If the market crashes, instead of taking out $100K, they scale back and take out $80K till the market starts to recover. They decide to eat out less, cut back to slower internet, one streaming service, and maybe that European vacation can wait a year or two?
The scenarios always assume the people just blindly keep taking out the same amount of money. I don't think that's realistic.
I'd love it if these scenarios could take into account some scale back for those worst case scenarios since they are including those worst case scenarios as possibilities...
If you build your portfolio out of securities that, first year, are yielding you just over 4% with a history of increasing their dividends at a rate faster than inflation then market corrections or flat markets won't matter as you never have to sell shares to get the income that you targeted.
For example - from 2005 to 2012 Johnson & Johnson's price went nowhere, literally lost value due to inflation. Was right around $69 in spring 2005 and by Nov 2012 it was back to...$69 per share, meaning after inflation your break-even was still a loss IF you are looking at price only.
However, if JNJ was part of an income generating portfolio, the dividends for JNJ from 2005 to 2012 grew each year by an average of 10.3% per year, far exceeding the inflation rate. In 2005 your JNJ dividend was $0.285 per share per quarter and by the end of 2012 your dividend was $0.61 per share per quarter, or nearly 114% higher.
Now, if you have a portfolio that isn't kicking out as much as you need to spend that then requires you to sell a few shares each year to bridge the gap, that is how you can get into trouble or even run out of money.
Imagine having a portfolio that was just the S&P500 from 2000 to 2010 where the market went nowhere. Well since the S&P500 typically pays out around 2%, in a flat or falling market that means you have to sell more and more shares in order to keep up with inflation and that can doom a portfolio.
4% rule is fine but one should start right at or real close to 4% on their initial starting yield with a portfolio, that when all averaged together, has a history of raising dividends faster than inflation overtime so you can past the point of needing to ever sell shares (less you already started above that point) going forward.
@@mjs28s Your example of J&J dividends is probably not a good example in that even in 2012 after a 114% increase it was still only a 3.5 % return on investment (2.44/69 = 3.5%)..
Hi Julia, When we talked a couple of months ago you mentioned that you were looking to get licensed in California. Has that happened yet? If not, when do you anticipate us being able to work with your firm and have our current plan evaluated?
Absolutely plan for the future and consider old age (if you make it) but don’t spend your entire life based on a possible few last years spent in a nursing home.
Buy high quality bonds with YTW at 5.5% Tons of them. Spend 4% and reinvest the remaining 1.5%. Adjust yearly at 3% inflation and you are good for 20 years (65->85), starting amount untouched.
You will need less after and starting amount will go the heirs. Yes, inflation will reduce principal burying power but still nice amount for children.
No need to worry about SP500 volatility, which likely will only return 3% (with dividends) in the next 10 years according to MS, JPM and GS.
It's also a lie to assume you will spend the same amount, plus 3% compounded every year, for the rest of your life. Data shows folks spending more in the early years of retirement, slow down spending in the middle year, and up again at the end due to medical expenses.
Yes, I said that.
Correlation does not mean causation. Think about it, the reason spending slows down is they over spent in the first years and need to make cutbacks in there life to survive.
“Ramsey Theorem” - You don’t need to be the best, but the loudest to make the most money.
He's the Marshall Applewhite of financial advice
In other words, only retire when you have 2M in gold, disposable RE assets, and zero risk bonds.
For retirement I think I’ll just move to California and take what I need from the store. You can take up to $1000 per day without a problem.
Great presentation
I am shocked that people don’t recognize that Dave Ramsey has different assumptions which lead to different numbers.
The 4% rule assumes a mixture of stocks and bonds. Dave Ramsey is assuming investment in an equity mutual fund.
The 4% rule has a low percentage because the plan is to increase withdrawal based on inflation. Ramsey’s advice is to take 8% every year irrespective of inflation.
Many people will prefer the 4% rule. Others will like Ramsey’s approach. Comparing them is an “apples to oranges” comparison. It is dishonest to present it in any other way.
"Ramsey’s advice is to take 8% every year irrespective of inflation."
8% of what ? The balance at the start of retirement ? Of the balance at the beginning or end of each year ? Something else ? Has he ever been clear on this point ?
And investing in 100% equity increases your risk.
Have you had any clients who have sold everything to live abroad in retirement or even early retirement? I see all these videos on how you can live very comfortably abroad for 2-3K a month and am trying to figure out if it is even realistic or what is realistic to retire early in our mid-to late 50s to live abroad and still have enough to possibly return to the US later when health declines. Would love to see one of your videos of this type of analysis.
I'm pretty sure Suze's comments were in regards to FIRE; retiring at 40, or something like that.
Actually the 4% rule does account for inflation, read the paper again. Try to be accurate
The stock market and financial institutions want to hold as much of your money as they can, Sure worst case you could be stuck in assisted living for a long time. This kind of care is very expensive, probably to expensive and not the ideal way to live, you are not getting what you pay for in terms of really living. These places can be sad and disgusting. If you fail to retire at all and never end up using your investments what good are they to you? You need to retire while you can still enjoy the life you have left. Better investing might be investing in your health.
I retired early in 1999 with $10 million. 25 years later with a family of four and a comfortable but not extravagant lifestyle, I have a net worth of $10 million. I have essentially followed the 4% rule although inflation and children’s education has increased withdrawals the past five years or so.
Quibbling about 11.47 not being 12 isn't really a "gotcha" in my book, and I've not heard of the "plus inflation" qualifier.
That, and 4 percent or 8 percent isn't a plan. It's a guideline. Using the word "lies" to describe this is a bit disingenuous itself.
I'd also argue that the last 50 years is a more accurate portrayal of the market than the last century. Many of the guardrails that exist today did not exist 100 or 90 years ago, nor did the index funds that Ramsey suggests.
And if you're expecting your last decade to be the lowest spending, good luck with that. Those "no go" years are the assisted living and long term care years which will burn through faster than any other year without a catastrophic event.
I liked Suze Orman until she said that "5 million" thing. At that point, I decided she was out of touch with her viewers. She has a net worth of 75 million, so I'm guessing her lifestyle is a bit more extravagant than people think. The rest of us don't need 5 million to retire.
Ppl had been retiring with a lot less assets than $250k.
I hug my pension everyday!
Dave has gone on record stating he has no intention of retiring and things the concept of retirement is dumb.
It's no wonder he gives awful retirement advise. He literally admits to not understanding it at it's core.
She’s too beautiful, I can’t concentrate. Closed my eyes and listened to learn the content.
As you speak about Dave Ramsey exaggerating, you claim that 10.69% is almost 2% less that 12% on the 100 year average of the S&P. Are we using exact numbers or not???
I would like a stress free retirement with guaranteed income and money growing in the market.. a combination of both. Hope to set up a consultation soon.
There’s no magic formula or percentage that covers everyone’s situation.
Exactly. Thanks for watching!
Although I agree that the 8% suggested by Ramsey is aggressive, the 4% rule is clearly an Investment industry number that benefits the big Investment houses and fund managers. The goal is not to die with a million dollars, the goal is to die with enough to cover your funeral expenses and maybe the legal cost of your family taking ownership of your real property. Also, I never get the 30 year time from for Monte Carlo Scenarios. If you are 60 when you retire, if you use a 30 year time frame - that gets you to 90 and the stats just don't support the likelihood of you living that long (not even 5% of the population makes it to 90) - The truth likes in the middle - personally I am shooting for a 6.5% withdraw rate over a span of 25 years when I reach age 58. Totally realistic sweet spot in my opinion.
Do you not want to leave any money behind for your loved ones?
@@Andrew-it7fb Nope. No one left me anything to make my stay on this rock any easier, nor will I be.
There is literally a new book called the Guru gap that covers this. Come up with your own ideas and terminology.
If you invest smart you definitely could do 8 percent withdrawal. But most have it in a 401k and money managers only gets you 7 percent per year. But put 100 percent of you money in voo with its low fee. You get 12 percent average every year. Makes a huge difference.
The 4 percent rule is stupid. But your kids and financial advisor will love it
Um....what does that even mean?
That is what I spend and I have my portfolio set-up such that the dividend income stream increases faster than inflation and a bit more than 4% comes in, meaning that I also reinvest a little of the income stream which then allows my lifestyle to improve more and more each year above inflation.
Didn't take a financial advisor to set that up. Kids - who says they are getting the estate? Charity my friend
The world is more than the options that you seem to think are available.
@@mjs28s it means you'll have more money when you die than you do now, I'm sure you can figure it out from there
@@johnspelman8976
If that is what you mean then try communicating so you have clarity in what you say rather than creating more questions.
But, you still never addressed the questions you actually cause from your statement.
Why will a financial advisor love it when it doesn't require one do to this? Why will your kids love it as they aren't automatically going to get your money when you die nor are they entitled to.
Can't you see yet how what you said makes no sense?
But ok, I am sure you can figure it out from here.
Oy
@@mjs28sseriously?
Why do planners always default to a 30 year retirement? Most people won’t live that long. If you only have a 15 year retirement then the 8% rule is not that crazy. A good financial planner will factor that into the analysis and not mindlessly put in 95 for everyone.
Because you can’t get money back if you live longer. You plan for the best case scenario dummy. By your logic we shouldn’t plan at all because you can die the day after you retire.
Ramsey be banned from speaking or appearing in public... or even going outside
What about property taxes
@ 9:20 mark is spot on.
Lady you are trying to be ridged with these concepts. They are just concepts not absolutes. I worked with several CFP's and they all... SUCK.. They all want 2% commission and not one projected more that 14%. Im at 92% this year alone.. Tech stocks are rocking it.. and if you are in them for the next 5 years.. expect to have high gains. I think every CFP is just stuck in old stock history and do not understand what is happening in the real tech world. you do your thing, I think I will stick with mine.
Lady? Man, you sound like me during the tech boom of the late '90s. I lost my shirt in 2000.
@ if things go bad, hold.. have a cash holding to buffer a bad 18 months but stay on the train… unless the company folds you should recover
Retiring at 65, you will rarely live 30 years. 20 years is pushing it. Plus, Debt does not flow down to your children. If you are married open separate credit card accounts and have all of your assets in a trust. It's tough to collect money from anyone let alone an elderly person. Remember, there are no Debtor's Prisons anymore. lol
You should be more careful in what you've assumed. Dave Ramsey never suggests putting all money into sp500 index funds, like you've stated. He says to put your money into 4 different baskets of stock mutual funds. This doesn't really matter for arguments sake, as the 8% rule is definitely crazy. But any Dave Ramsey fan could stop listening once you've stated something factually incorrect. Which would be a shame, because the 8% rule seems like it could really get someone hurt badly.
And here she is, gonna tell only the right thing 😅
Both Dave and Suzzy are completely off base with their strategies. Dave, you’re gonna be living in a box later in life and Suzzy would have you working till you die.
Retirement is extremely personal and it must be tailored to you, not some general hack advice.
Love all the variables that determine success. One size does not fit all😔 …….fiddlesticks.
He’s a bad bad man. How dare her mislead us lemmings.
Susie is an amazing influence for all women all over the internet. But she’s a bad bad woman. How dare she mislead us lemmings. But I agree with her notion to not leave money to your kids. Spoiler….… this is a software commercial. We are such lemmings.😔
You might need to check up on Ormon a bit. She is criminal and was driven out of the investment community for a reason.
Dave Ramsey did not say it was an 8% rule, he used 8% as an example. What he said is that you have the freedom to adjust your withdraw rate based on the market. Bengen who developed the 4% rule has even stated that is a suggestion. Further studies have shown that with the 4% rule majority of retirees actually increased their holdings while in retirement after 20 years. The whole point Ramsey was making was that it's not a rule but a suggestion.
Sorry, Dave is steadfast on the 8% rule, he spouts this garbage all the time. It’s criminal and people that follow this will be left holding the bag!
It is disingenuous calling these lies. You lost credibility from the beginning of the video.
All this talks not focus on the issue … you must preserve your wealth and not invest in retirement … stocks and bonds go down together !!!
That's just too much common sense for one video!
Humans? Who says 'humans?' Why don't you just say 'people' or 'folks'?
You say 'humans' as if animals withdraw money at 5% or some other rate.
Big Dave Ramsey fan here. While 8% is a little much for retirement, in my opinion. I think that there are a LOT more people now who will be able to retire with dignity! We personally plan with the 4%, as well as assuming that we'll receive $0 from social insecurity. I think you brought up a lot of good points! I love watching different perspectives on retirement! 🙂
Should you be a "fan" of any adviser? And why do you assume you'll receive nothing from Social Security? You can retire with dignity on 4% if you've planned well, can't you?
@@jps0117 I love understanding different perspectives. Especially since I have a lot to learn still, learning from others will absolutely help me long term. That said, I also have mentors in different aspects of my life. Not planning for SS is making me save more. So if I do receive some, great! But what if I don't? Or it is greatly reduced? I don't like to rely on anyone, especially the government!! So if I have enough for retirement and can comfortably live on 4%, yeah, i'll be a happy camper.
You’re soft i knew these two clowns 🤡 were BS many years ago
-_- when people like this pull crap out their butthole and blah blah blah. Dave doesn't have an 8% withdraw rule. He said 8% withdraw is still okay if you really want to, given that the market returns 10-12% on average, which means, at 8% you probable won't go broke in retirement. Its not a rule, its a suggestion that 8% is possible.
I have no kids, no heirs so I'll bump up to around 6%.
Try listening next time. Not what he said.
I guess you don’t have to know math and statistical modeling to be a CFP. The 4% rule is based on a simplified statistical model and it doesn’t account for every single thing the could happen to a person on his path to retirement. Those factors are impossible to add to the model because because we don’t have a crystal ball to predict the future. It might be a flawed model because of what you pointed out but it’s the best model that we’ve got and it’s been vetted by a lot of very smart people. I’d recommend you pull down this video because although you look good but you sound very ignorant. Ever wonder why you’re the only person on YT who object about the 4% rule?
LOL. I think you should go take a cold plunge or do some deep breathing to calm yourself. Before you take time out of your busy day, make sure you actually watch the whole video.
You should do a search. There is lots of commentary on youtube and elsewhere about the misuse of the 4% "rule".
She didn't say that it accounts for every single thing that could happen. 😂
I didn’t get any investment information. All I can think of is MILF.