Dave Ramsey's Dangerous Financial Advice
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- Опубликовано: 22 ноя 2023
- Financial Experts React to Ramsey's Terrible Financial Advice regarding the safe withdrawal rate.
Article: Supernerds Unite Against Dave Ramsey's 8% Safe Withdrawal Rate
www.thinkadvisor.com/2023/11/...
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Thanks you for this video, and the link to the article. I have listened to Dave on and off for many years. I like much of what he says. I have followed a lot of what he teaches for personal finances. But not his retirement advice! When I heard him claiming that an 8% retirement withdrawal rate was reasonable I cringed. It is ludicrous to believe that is workable for the majority of retirees. I like what the 401klady said, "Dave doesn't need his nest egg." But, Dave, the rest of us working folk do.
Dave is the perfect example of why you don't just blindly trust someone because you like them. I love listening to him take calls and giving advice. But yeah, an 8% withdrawal rate assumes that, even in retirement (when you're investing less aggressively), you can get at least an 11% rate (with the other 3% keeping up with inflation). The S&P 500, which is one of the best "set it and forget it" investments out there, historically only gives you 10% over any 30 year block of time. Of course, in retirement, you might not have decades to recover from a huge drop in your portfolio and need to be less aggressive. A 7% rate of return and a 3.5 - 4% rate of withdrawal is more realistic.
So you didn’t actually do what Dave advised to do with his 7 step plan you just listened to it. Big difference doing and just listening and not doing 🤷🏽♂️🤦🏽♂️
My retirement account has gone down by 13.7% in the past year due to rebalancing I did out of fear uncertainty and doubt. What are best alternatives to take in other to secure a financially free retirement and achieve ultimate peace? I don’t want to fail after 42 years of working hard.
If you want to rebuild your retirement by yourself, without the help of a partner, I will tell you it is near impossible. Even NewRetirement and co can’t do the job of an FA with expertise, a large following/client base and experience. Vet and hire one and begin to develop a rapport.
I wholeheartedly concur; I'm 60 years old, just retired, and have about $1,250,000 in non-retirement assets. Compared to the whole value of my portfolio during the last three years, I have no debt and a very little amount of money in retirement accounts. To be completely honest, the information provided by invt-advisors can only be ignored but not neglected. Simply undertake research to choose a trustworthy one.
How can one get to interview advisors? And what questions should you ask?
There are a handful of experts in the field. I've experimented with a few over the past years, but I've stuck with ‘’Colleen Rose Mccaffery” for about five years now, and her performance has been consistently impressive. She’s quite known in her field, look-her up.
Thanks a lot for this suggestion. I needed this myself, I looked her up, and I have sent her an email. I hope she gets back to me soon.
Retired 13 years ago. Have maintained a 50% stock index fund/ 50% bond index fund over that time. Have carefully tracked my return and it averages 7% annual return with a high of +16% in 2013 and a low of -14% in 2022. My average annual withdrawal rate has averaged 4%, some years more, some years less. I sleep well.
You are a prudent man! I just ran Dave’s $1 million 12% scenario through a calculator, but with a 25% ‘market correction’ at the beginning of retirement. So, starting with $750K and taking the $80K from Dave’s 8%, and still with a 12% annual return, the fund last just over 18 years. Now, you can drop it to 8% of $750, but that’s a reduction of $20K a year. Who can budget that shortfall? Dave’s advice AT retirement is very, very suspect. His 12% return on the short term is not realistic and could be very detrimental for someone who ‘barely’ has the funds to retire.
Inflation over the last 13 years has averaged 2.5% (even with the spike in 2022 since we had some very low inflation in the 20 teens.) so that suggests your portfolio has the same inflation-adjusted value as when you retired, maybe even gained a little. Sounds like you're in good shape.
Your numbers track pretty much with what experts say you should expect/aim for. 7% rate of return, 4% rate of withdrawal, 3% keeps up with inflation. I've got about another 9 years to go before I can retire. My wife only has 3 and she has a very good pension as well, so we're in good shape. The only thing that surprises me a tad is you have 50% of your funds in the stock market. Everything I've read says you should only aim to have 20% of your money in the stock market. I guess I need to read up more on that. Thanks for the post.
@@dontbanmebrodontbanme5403That maybe used to be the advice, but since people are routinely living into their ninties you need more exposure to the potential growth in stocks for a longer time. I'm in my early seventies and my financial advisor and everything I've read have said 50/50 is a reasonable split for my age if not a little conservative. Since you are nine years out from retirement you may want to consider an even larger proportion of stocks as you would have time to weather any downturn in the market. At the end of the day it's all about how much risk you are comfortable with. Suggest you talk to a good fee based advisor. By the way, my stock position is in an SP500 index fund and my bond positon is in a Total Bond Market index fund. I don't own any individual stocks or bonds.
I found a fund that returns 12% return each and every year. Unfortuneatly it was run by Bernie Madoff
Good One--
A good conman doesn’t claim 18% returns because that would draw too much suspicion. Bernie actually claimed 10% if I’m not mistaken. He was a crafty conman.
Exactly.
Except that’s not what Dave is saying. He says on average the SP500 returns 8%. Not that every year it will.
@@themuskrat5776 Actually, Dave talks about a 12% return as if it was common.
Dave Ramsey's plan for getting out of debt is good but his investment advice is not. Also, his plan assumes you can always find another job or hold several jobs, or rely on a spouse for a second income, and emergencies happen one at a time. Far too many people are dependent on their individual income, are not able to take on more work due to family commitments, and many experience multiple emergencies at the same time (job loss, medical illness, accidents, natural disasters, divorce). Sometimes life just sucks.
Thank you for posting this. I am a Dave Ramsey fan when it comes to getting out of debt. Your video reminds me to carefully consider my retirement planning and not to follow anyone blindly.
That's really the takeaway from all of this. When you hold up people that you admire as idols, that's when you can be suckered, fooled and led astray. This is how the Bernie Madoffs of the world are able to do what they do. They build up such a reputation that the idea of questioning them is heresy.
Dave is very helpful to those who don't have a million dollar portfolio. He helps some people to get out of debt. His advice to these folks is sound although not perfect. The baby steps, etc. that he provides are good. Once you get out of debt and actually have money to invest, Dave is not your man.
You are correct. Dave's principles can only take you so far. I've always said that Dave is great at taking people from broke, to not-so-broke. But if you want to move on from there, you need to move on to anyone that can give you personal attention. Its not about what you know, it's about who you know. You need a mentor that you can call in the middle of night when life sucks. You don't need access to information, you need access to the right relationships. You could read all the financial principles in the world as still be broke. You could even DO all the right things, and still be broke, because you didn't have the right mindset going into it. How do I get the right mindset? Get around the right people.
Best comment here……Daves simple method works for the MANY who get themselves into a debt mess. Sadly he come from an old school financial attitude, real estate heavy background that makes me think of my loan officer dad from the 1980s. If you are in debt trouble he has helped many thousands get out of the hole. Once your back on solid ground his advice is of very limited value.
agreed
Exactly I even think he's offer people who are in debt. He wants us all to be miserable
Dave likes to give a “one size fits all” advice.
When I dicovered Ramsey on the radio 30 yrs ago, he simply reminded me of my father and his matter of fact approach to how I should avoid financial blunders. Funny when Dave taught it, I actually did it, not when dad was preaching😂
I think the most telling thing is, notice how he never tells you his actual investment portfolio distribution. He just gives a vague 'oh I get a better return than SP500".
I used his debt snowball to get out of debt and really love that but I don't seek his advice on anything else. Frankly, I don't like his personality so I can't listen to him much but a friend of mine told me about the snowball and it worked really well and quickly so I give him credit for that.
Ramsey doesn't address the negative power of interest. At the same time, his thing is to create a formula turned mantra which works more so than other approaches with the masses. The snowball approach gives you enough cash flow to work with while addressing the psychological issues related to getting into debt in the first place. But the first rule is: First add no more debt. In some cases, it quickly becomes important to pay down debts which due to daily compounding interest have balances owed increasing daily. - Those people who have come out of debt fairly quickly, all things considered, have used a mix of rationale and approaches during thier debt journey.
@@dbdb4962 Everyone's debt profile, income, credit score, and the like are different. It is also very important to figure put the functional interest on each debt. The interest percent is but one part of the equation used to assign interest dollars owed. Functional interest is: ($interest/$min ×100). Daily compounding starts to make the interest rate less important. There is a Walmart card out there that has an 85% functional interest; the monthly minimum payment is relatively low though.
And yes, the Ramsey snowball method does address the psychological aspects of a debt journey but it also provides enough cash flow that people can meet thier minimums and still live. Ramsey isn't as interested about credit score but the snowball method does have the possibility of creating more un-used credit/ available credit faster too. The snowball method enables more cash flow from the income/ budget for debt paydown and payoff.
Dave is a salesman first and a financial advisor second
the only way he makes money is all his useless books
Well you got the first part right and I would even say he is an entertainer only. He definitely is no financial advisor.
@@gregwessels7205 yeah and his daughter is trying to get in the game her BOOKS nothing really to say
1st Dave is a God fearing Christian
2nd Dave is a happily married family man and great provider
3rd Dave and his family attend church
4th Dave is an astute business Realtor and investor.
5th Dave is a millionaire
@@bobzelijah who cares
Years ago, I watched Ramsey's "Financial University" series, or whatever it was called, because a friend was a big fan and had bought the course. The one thing I thought he got right that might contradict some experts was his advice to pay the smallest debt down first, rather than the debt with the highest interest rate. I think he correctly tapped into the emotional connection we have with our finances and the concurrent need we have for gratification--Paying a debt down to zero gives that gratification and encourages us to continue the journey to debt freedom. That was about it. Other than that, he sounded like a snake oil salesman. And then I saw him pitching investment services from which he obviously earned a commission, and I completely tuned him out.
"And then I saw him pitching investment services from which he obviously earned a commission". So right Rick! His radio show, personal appearances, RUclips channel, books, courses, and school curriculum, are all a coordinated pitches to get the masses to forever only invest with mutual fund salespeople (his Adviser Network) who split their commissions with him. He encourages investing but blatantly shits on any investment paths that don't earn him a commission. And then there's his commission-earning timeshare exit pitches that currently has him being sued for $150m.
Some people are out of touch...you never assume a one-size-fits all strategy for ANYone.
the best get out of debt advice I ever heard is "when you find yourself in a hole the first thing you do is stop digging"
It's a maybe. I can put my entire retirement in Tbills at 5% and withdraw 5% and never touch principal. But, if I withdraw 8%, I am slowly winding down the principal and may be close to zero when I pass. The question really is do you want to leave anything and how healthy do you predict in your retirement years?
True. I'm not sure how much longer we'll be seeing those "risk free" 5% T-Bill rates. It's been a nice change, though.
Tbills won't stay at five percent much longer
Thanks Martin for the heads up!
We don't have to beat down Dave Ramsey (not implying you did). Dave has a clear ego problem that usually stems from feeling less than those who are certified and have greater experience. He is quick to malign others on his program but extremely slow to admit when he is wrong (repeatedly). Dave won't sit in a live discussion with financial industry professionals because he would be exposed very quickly and that would not be good for his brand. We have seen this act before.
So when you said “we don’t have to beat down Dave…”, you meant “let me beat down Dave for all of you…”, right? 😊
Reversal, it's actually Dave who was beating. He was beating on licensed professionals who are held to an all time high fiduciary standard.
Dave Ramsey is Mr. Know it All! And actually he does NOT know it all!!!
Thanks Lane for the reminder, don’t always believe everything internet says, no matter who, always fact check from multiple reliable sources
Ok...Ramsy is way more right than wrong. However, he is a bit aggressive on investing and projections. Now that said, he is "usually" right. In hindsight, most of the time, 8% is safe to withdraw....ASSUMING you are 100% invested in the SP500. Ramsy is good for the basics, but one size doesn't fit all in the investment realm.
I’m one of those people that could have done a debt-free scream on his show. God bless that man for getting thousands of people out of debt! But I knew, even while I was implementing his advice to get out of debt, that after I did, I would not be taking his advice further. Great video. 😊
To be able to give credit where credit is due and to be able to question a one size fits all platform is not easily understood or undertaken by most. Great post...
Being a happy home owner it's awesome to be debt free. Then you need a 20,000 roof. Car drops a tranny at the same time. The sewer line needs to be dug up and fixed. it's freaking hard today to remain debt free. Things break and wear out.
@@007connecticut The paying off the house early is one of his mantras in which I have a big problem. My aged mother needed extra assistance and so I refinanced my home at 2.7% and took out extra cash for her care. At the time, the banks were estimating 9%-12% if she had done the same. (No job, small pension, but house worth $700K and paid off) She passed and I got my money back from her estate. Some of that I kept on the sidelines for roof Re shingle/new HVAC, but the rest I put in the S&P. The return since I got my money back has been about 30% even with the Covid correction. So, can anyone tell me why I should have paid off a 2.7% loan with money that has earned 30% in the market🤔 Even at his 12%, it doesn’t make sense.
Thank you for covering this very important topic! I sincerely appreciate it.
I love Dave Ramsey, but hate how he’s unwilling to hear opposing opinions and understand the math they’re following. He goes straight to insulting instead of hearing others out.
As with any advice you get from anyone: consider it advice and not law. Do your own studying. No one will be willing to put as much work into figuring out YOUR situation as you.
True Auntie but unfortunately many people don't want to think for themselves. They will uncritically follow anyone who promises them a simple path. Dave repackages basic common sense and trademarks it "baby steps" for a reason.
Well sure. But its not even substantiated advice.
I know nothing about Dave Ramsey and viewed this because of its label of dangerous financial advice which I want to avoid. I do 'financial advisors' have a good thing going for themselves. They get to provide a service that will (maybe) pan out many years later but they get paid now. Imagine an electrician handing you his bill and saying that outlet will start to work in 10 years. I think all financial advisors' advice should be labeled 'dangerous'.
Does my heart well to hear this program. I had 40+ years in the financial industry and only listen to him a few times. He has a massive following, most of them taking his word as gospel. Unfortunately with my background I can not stop & watch the train wreck. He has given numerous video's with bad advice. Not just my opinion but actual factual bad advice. I wrote back on a couple of them with documented citations & examples. NEVER got a reply. I fully admit I have only watched a couple of shows & can not bear to listen to more than a few minutes. I have to switch him off. Yes, a few items he may "get right" for the masses, but most of the time I would advise different approaches. He sells a lt of books & video's though. Yes; HE IS AN ENTERTAINER !
Who do you recommend listening to online RUclips?
I like the “money guys”
I listened to Dave Ramsey back in the mid 90s, when he was on local radio in West Nashville. His get-out-of-debt strategy is great advice. But I am well past listening to someone who thinks $80K /year is a safe withdrawal on only $1M -- more $40K in reality.
if all you can get is 40K on a Million then you obviously have no idea how to work the markets, I think you need to educate yourself on covered calls, put protection, Buying CEF style funds, pays dividends, also learn to trade each week, you can make yourself well more then 10% on that every year.
@@robert-ku7zr I have been an investor for over 20 years, so I know how derivatives work. But, my wife actually forbade me. To get high returns, I invest heavily in Microsoft, Google, and later NVDA. My returns are almost always above the markets, and I could theoretically withdraw well above 10% -- when I retire in 5 years. At that point, though, I will shift to less risky etfs and stocks.
I heard Dave say “if he were half wrong” would work perfect in the numbers I see here. 😂
@@robert-ku7zr I am retired, and don't NEED more than $40K/year from my stocks. So, I would much rather get rapid growth from stocks like Microsoft and ETFs like VGT. I pay much less in taxes than I would selling options or playing other derivatives, and do not have to keep a margin account. If my monthly expenses are higher than normal, I also have 9 renters + whatever my wife earns from her investments.
Say what you want about Dave, reading his books years ago saved my butt. I am 21 days away from paying off the house, and finally cutting the ball and chain. Paying off the credit cards helped me get here, and I will NEVER borrow money again!
From a personal debt viewpoint, IMO Ramsey is spot on with his advice. HOWEVER, regarding the "portfolio withdrawal rate" topic, he is 100% dead wrong. No one in retirement, unless they are worth hundreds of millions of dollars and/or earn upwards of $30 million per year, like Ramsey, should ever invest 100% of their portfolio in the S&P 500, which Ramsey references from his "8%" withdrawal "advice". Ramsey DOES NOT withdraw from his portfolio and his income can more than fix any market slide experienced by his equity investments. The "average Joe" is in a much more financially percarious position, and can ill afford to withdraw at a 8% rate when they might have only Social Security and their savings to live on. Also, Ramsey's asertion that his portfolio grows "12%" every year (his exact words) is a lie, and does not take into consideration the sequence of withdrawal risk which translates into the risk of prematurely depleting one's portfolio by taking out too much funds when the market steeply declines. And, no Dave Ramsey, one's portfolio does not "increase annually by the rate of inflation", as he's often said.
Again, for offering savings and living debt-free advice, I give Ramsey 5 stars. For giving sound investment advice, I give him zero stars, and he's actually dangerous for the uninformed retirees and near-retirees who chose to rely on his investment advice to satisfy their income retirement needs.
Ramsey's bad advice doesn't have to do with getting out of debt, rather it's his awful advice on investing and withdrawal rates. He conflates average returns with actual returns and completely ignores sequence of returns risk. He says everyone regardless of situation should be 100% invested in the stock market which is terrible advice.
@@beernutzbob Totally agree!
Dave Ramsey didn't invent the concept of not getting in debt. You're not obligated to him at all.
@@RossLemon True, but Ramsey deserves some credit for influencing people who needed direction to get out of debt and live a debt free life. However, I'm not of fan of him, particularly due to his arrogant and dismissive way of talking with people who think differently than him, and his dangerous guidance on excessive retirement fund withdrawals.
One more thing. Car payments can cripple your financial planning. But repeatedly putting cash into a POS car that can leave you stranded and cause job loss, "... your greatest wealth building tool." is not a good option either. It's wise to plan for retirement, but the kids have to eat every day.
Totally agree with you, of course don’t buy a new car every 3 years on credit, but I will not apologize for spending 20k on credit of a used minivan with low miles. I needed this for work, for my part time business and my once a year 2000 mile trip to visit my two oldest adult children, and grandkids. Something that I could not do with a cheaper car. And this current one will probably be paid off next month, and I will drive it until it looks like a Dave car.
@@paulphillips6151 My SUV is 14 years old and still in good shape. However, I worry about long trips with it and breaking down in some remote area. My solution was to rent a car for these long trips. Of course costs a few hundred, but the peace of mind is well worth it.
Dave’s unchristian rants and self righteousness are the result of too many idolaters and too much $$$success. Time for another dose of humility in your life, Dave.
Maybe dose of less judgememtal attitude
“Unchristian” lol. Tell me you don’t know what you are talking about without saying you don’t know what you are talking about. Christianity isn’t about being sweet all the time. You can be rebuked and shown the error of your ways. Proverbs says “he who doesn’t like correction is stupid.” Get a clue
I will move in to live with Dave when I run out of money. Hope he will have arms wide open to welcome me!
Nah think he would prefer to live with his wife solely. 🤓😎
I can't listen to Dave more than 5 mins. I would never move in with the guy. 🤪
She is right. Dave is the Goober. An assumption of 12% return is asinine. There have many long periods where market returns where in low single digits.
😂😂😂😂
When?
@@themuskrat5776 66-81 was 0%. 29-45 was -50%
This is just ignorance. There are NOT many long periods where the market returns low single digits. Just insanity.
@@knightwriter2989 as they say, “Those who do not learn history are doomed to repeat it.” Good luck!
So, Dave Ramsey is to financial advisor as Dr. Laura Schlesinger is to physiologist?
BINGO
Yes, that is why he is so wealthy, because he is incompetent.
As Orville redenbacher is to popcorn and col. Sanders is to chicken.
@@rollinsdet8229 you are right and all I can say to an old reply is autocorrect strikes again! Duck!
Psychologist but we knew what you meant
Dave is completely in left field with his 8% withdrawal rate. The 401k lady is very credible. I for myself saved over 2,1 million dollars. I am done with the stock market. Everything is invested in GIC at an average rate of 5% so I get more than $100,000 per year without taping into the principal. This gives me a great life!
Don't forget inflation can eat your lunch!
Ramsey callers 95% of the time have silly little "humble bragging" questions. They are in great financial shape & want a pat on the back.
Dave picks the callers.
People call in all the time with high car payments & high a Visa balance. Then they inform Dave they make $275k lolol.
Oh me oh my what to do lolol.
95% is obvious exageration
@@greggpurviance7252 I meant to say 94%.
Thanks for linking the article Martin. It was both educational and entertaining (even for a non-supernerd).
He has absolutely terrible advice regarding when to take Social Security. "Social Insecurity" is what he calls it. The fact is, the vast majority of Americans rely on this as large (40% on average) part of their retirement income.
I actually agree with Ramsey's "it's ok to take SS and invest the money at 62". But one size doesn't fit all.
Social Security should be abolished.
@@frothybeaver4869 Why?
When someone with
$500,000,000
gives a poor person financial advice you might have a bad time when they run out of money.
It really does come down to risk tolerance with all the parts affecting each individual. I am adverse to risk, but love to dapple with extra funds to feed my FOMO.
More of the rich telling the rest of us how to live...
True, but Dave didn't get "rich" investing in equities like stocks, ETFs, or CDs -- he got rich hustling little people into buying his strategy. I take my investment advice from professional investors like Peter Lynch, Warren Buffet, or Jack Bogle.
Exactly.
Would you rather get financial advice from a poor person?
2 years ago it was not atypical to have investment advisors from major financial institutions tell you that they could get a 7 percent on average with funds that were only medium risk. I didn’t go for it as I have been investing a long time. And there is a lot of wiggle room in that statement, if you know anything about investing. So I would disagree with anyone that 7 or 8 percent guarantee is a sure thing, but Dave didn’t say anything different than what some other major financial institutions claimed to be true as well. And in this current market, not even sure they can guarantee 4 percent.
This was a very good video. I do follow Dave Ramsey's advice. Now that I am retired, however, the only withdrawals that I take are RMDs (after I pay the taxes, I roll the remainder into brokerage). I was always skeptical of his 12% average annual return rate. Again, it's not an issue for me personally. I think that pointing out that his numbers are probably overstated is important. He has been successful for so long he is probably over the top. What he does well is help people get out of debt and to invest the 15%. Because Americans are not saving as much as they should while spending too much using credit, his message is sorely needed.
DR is elementary and we should all strive to graduate from him. His 8% withdrawal rate and 12% market return have all you 'professionals ' right where he wants you- talking about him. LOL
We’re more worried about the poor fools who listens to him and believe that 12% exists and retires and then loses his house, etc. 🙁
Yeah, at times Ramsey can be very off base on some things. I find that sometimes people can do all the right things but then "life happens", and even of you have money saved and a nice safety net, it can and does all go bye-bye in some cases. I stopped listening to Dave on the radio show because when people are in debt, even if no fault of their own, his answer seems to be most times to tell people to find a way to make more money, get 3 jobs, blah, blah, blah. Its not always possible Dave!!!!!!!
But Dave Ramsey sounds so confident! How can he be wrong?
We've seen this before. Maybe that's why he shows off his gun in one of his videos.
Dave has made his money and more then every financial GURU out there, so why beat that man up learn to guide your own finances and thats what dave tries to tell you all, , Dave is in the business of getting fools out of debt,
@robert-ku7zr that's all he does. Anyone can get out of debt. Its not rocket science. Save money to pay off debt. Duh!
@@robert-ku7zr He's made money BECAUSE of his business, not necessarily all from his 'investment' management.
@@miketheyunggod2534 yet millions don’t do it. Lots of things are simple, but not necessarily easy to do. People have to change their mindset and I think that’s what Dave does is help them change your mindset and ways of thinking about things and he gets them to take action.
I listen to many different advice channels and read books & articles regarding financial investment strategies. Then I formulate my own decision on which plan to execute. When uncertain, I'll re-direct small amounts experimentally. But in the end, I own the decision, because I must live with the consequences.
Blanket recommendations will always be bad advice for some folks.
I’m really admire you! 😍👍
He told me to pay off debt with a small inheritance even though I had just lost my job; instead of putting it in a good savings venue. I would have still been out of debt in a year - but the nest egg would have helped me save, invest, and feel safe enough to go back to school while starting a business. In essence, he cost me time, money, and peace of mind. The job market was terrible then, & it took me a while to find something. So I had some paid-off debt, no savings; and then I had to start running the credit cards up again to live.
You were free to not take his advice.
@ReneeDeane, that's rough. You learned a lot though. Always good to get a second opinion and go with your gut too.
@@maryricketts7337 I paid for the advice and thought he was more knowledgeable than me, so I took it. The problem is with going with a one trick pony "get out of dept no matter what", and not someone who would have optimized that inheritance based on real expertise in multiple areas.
Agree that Dave is great for helping people to get out of debt and avoiding debt. But the investment side is not realistic. It always gets me when he days the market has returned 10% or whatever over the past hundred years. THAT'S NOT YOUR TIME WINDOW. It may be up 30-50% this year and then in two weeks lose all those gains and then languish for years. Like in 2008. Like in 2020. Got many years to invest? Absolutely, be all in. Retiring in a couple years? Most of your money should be in something safe.
Didn't the late John C. Bogle predict available real returns on practical investment portfolios of 2 or 3% per year (and qualified that that was only a chance,optimistic and not assured) ? Shortly before his passing?
I like the no debt philosophy. Very freeing
I can understand why Dave came out with this advice at this point in time - fixed income investments have gotten crushed these last few years due to inflation, and CFPs who have doggedly adhered to “tried and true” investment allocation strategies based on a clients age to minimize risk potentially INCREASED investment risk instead. It’s quite possible that many CFPs have gotten a bit complacent regarding this risk as fixed income has been either in the black or stable over the last couple of decades and so were caught unawares when inflation spiked as aggressively as it did. I believe that the “safety” of fixed income investments is a myth, unless you can buy and hold and live off the coupon rate. Also, suggesting that folks live off LESS than a 4% withdrawal rate in these inflationary times is really ridiculous - how much easier do CFPs want their job to be? The less a retiree withdraws the easier it is for a CFP to maintain the portfolio balance or even increase it. No wonder all the CFPs are upset at Dave - his listeners are probably taking a much closer look at how their portfolios are actually performing and are asking hard questions.
Gotcha, sooooo 1) So "this point in time" means 100% overweighted S&P is validated? 2) This advice of Dave's has not been isolated to this interest rate cycle as you represent 3) Safety of fixed is not absolute. However, relative to equities it's safer. See the order of claims in corporate bankruptcy 4) Like Dave, you can throw stones at people who took the time to study and be credentialed. But let's be clear, you have offered NOTHING that contradicts the Bengen studies of the 4% rule. Referencing only current inflationary times shows that you didn't read how the study was done. You have offered nothing other than a Ramsey-esque baseless rant. Ohhhhhh, there it is. That explains it!
@@wannamontana4130 Thank you for your detailed reply - my thoughts: 1 - I do believe that, at this point in time, overweight in equities is validated - we have entered an inflationary period and I believe the potential upside in fixed income investments is overshadowed by inflationary risk. 2 - Understood about Dave, and I am not defending his previous comments/advice. However, many CFAs have stated that Dave has said some valuable things in the past. 3 - Order of claims in bankruptcy is not the only factor to look at to evaluate risk. Everyone knows that bond holders get paid while shareholders are wiped out. It’s inflationary risk that can impact any and all fixed income investments, even those issued by solid companies and governments. 4 - No one is negating the hard work it takes to become credentialed. However, money management is a profession that is ultimately judged by results, not credentials. Asking investors to take out less and less from their portfolios just makes the job easier for money managers and, for those who work on a fee based on the amount being managed, a better payday.
@@wannamontana4130 Dave’s 12% yearly return and 8% withdrawal with $1 million could easily end up with many people being financially devastated at retirement. All it would take is a 25% market downturn as they retire and even with a 12% return afterwards, their funds would be gone in less than 20 years.
Ramsey's ego and ranting get on my last nerve. Glad this video has been released. He is clearly not in touch with reality for the masses.
Well said. 😀
Thanks for exposing this DANGEROUS FINANCIAL ADVISOR.....
Dave is not a financial advisor.
I have been retired for just a year now, and only living off my 401K and IRA, I am 65 will not take my SS for one more year. My financial adviser/planer tells me my withdrawal rate needs to be fluid and change with the financial environment and my own financial needs. Right now my withdrawal rate is 6%, it will then change next year to 4%. We are Blessed to own our new home and zero CC debt. Over 80 years of the stock market the 'medium' not average rate of return has been 9.3% not 12%.
What does 'medium' mean? Is 'medium' equal to mean? Or is 'medium' equal to median?
I don't get the 8% either. Even if your portfolio is earning 15% annually, you might be comfortable drawing 2-4%, leaving the rest to continue growing. Depends on your situation.
For instance, I'm 64 and pulling SS retirement early and still working 20 hours most weeks. My retirement account has fallen off 20% the last three years. Fortunately, I don't need it yet. Also, I'm recovering from cancer and survival rate for this type is marginally 5-10 years. Started SS six months before it came up, on instincts I suppose. Have the VA for healthcare, another advantage. My point is Dave's ideas are mostly useful, but from his very secure POV doesn't seem to realize that one size does not fit all.
Dave seems to forget how inflation eats most of your long term gain.
I still listen to his show out of pure entertainment and amazement of human behavior.
three bad years taking 8% and you just tanked your retirement. I use a 2% withdrawal rate and doubled my money in the last 5 years.
The problem with paying off long-term debt is that your liquidity is almost gone. If you want maximum return on your home, you have to be leveraged. Ramsey is against all this.
most money markets are only at 5.5% not 12%
Dave Ramsey obviously does not understand the difference between average annual return and Actual Rate of Return. Dave obviously does not understand Negative Sequence of Returns risk.
Dave Ramsey while great at helping families get out of debt is way off here.
Many would call this Financial Malpractice
Shameful!
This woman is spot on about Ramsey. A 12 % return every year without any crashes ? I guess Ramsey is better than Buffet and Munger. He is a marketeer of his own celebrity and not much more.
My return rate is 1.25%. It’s calling checking plus interest.
My house has a mortgage on it. I’m retired. I also have an apartment that grosses a chunk of change. I could pay my mortgage off, but it would cost me in taxes. I am not following our good friend Dave’s strategy. He would want me to sell this good income property and put this non productive money in the bank, or worse yet put it into riskier investments. Not to mention I would loose the taxes I would have to pay on a depreciated asset,
Yes, since you have debt you must sell the income property, pay off the debt, and invest the rest. Don't worry about taxes. Only invest in front-end load mutual funds through a Ramsey Solution's endorsed sales person from his Adviser Network. You'll indirectly pay the adviser a hefty commission but it's all good because that sales person will pay Ramsey a nice referral commission and likely split on-going commissions with him too when you start your monthly investment deposits. Don't invest in ETFs or stocks because with those Ramsey doesn't get a commission.
If that doesn't sound like a good plan you need re-education. Take a course from Ramsey's Financial Peace University and buy his book$. Drink the kool-aid and join the cult!
The predatory naked short selling situation with GameStop still isn’t over. GameStops balance sheet says individual investors have DRSed 75+ million shares, shares that shorts cant close with.
I'm definitely a fan of his get out of debt and staying out of debt mantra, but like most I just ignore his impractical advise. Buy a house no credit? 8% withdraw?
The market has been down @20% since early 2021, according to my rollover IRA, created in January of that year and started a new 401k. Has almost recovered, since EV investors started moving their money elsewhere. My gains until now have been my own contributions and matching to the 401k, and that has eroded along the way. A year ago the entire account was worth less than everything put in, but I left it and continued buying, at a discount. There certainly hasn't been 12% growth in the last 3 years!
I do live in the basement, for $400/month, which covers the mortgage on this house. Win-win. Also have an accounting degree, 3.5 GPA, and actually do know how to use my calculator, spreadsheet and algebra.
You are doing something very wrong if you are down 20% since 2021.
Great videos. Lets be perfectly honest....everyone will need every penny in retirement. IMO, unpopular as it sounds, everyone should plan to work until they are food for trees and fish. Sounds bad, but it isn't. To put costs in retirement into perspective: the real inflation rate, in just a few short years has already caused costs to exceed or is close to exceeding the incomes of many, if not most, boomer retirees already. Then, there are the outliers, then there are nursing home and/or long term care costs, which in many areas exceed $7-10K every month in/around medium-large metro areas. Most people don't even earn that much in their working years. Sorry to make it sound so bleak, but it isn't.
IMO, the best advice to High School kids should be told to start early and find a profession/career that they really love....one that they are so passionate about that can continue forever. If it doesn't happen right away, they should work to find their place. Also, find a career that does not require an expensive 4 year degree. Save. Invest and save some more.
I used to listen to Dave Ramsey years ago, but he lost me when he (evidently seriously) cast aspersions on Clark Howard's character for saying people could use credit cards responsibly. Ramsey suggested Clark he was a paid shill for the CC industry.
Clark Howard doesn't do paid endorsements.
Ramsey's a huckster who's made a fortune telling people stuff they mostly already know. His main product is himself.
Dave’s a salesman. Period. 👨💼
This is the first video that contradicts Dave Ramsey that I agree with. I used the debt snowball to get out of debt and it works! However, I never agree with how much he thinks you can put towards debt or the expected return rate on investments. I think he doesn’t understand all the payroll deductions normal people have.
jeanne the 401k lady is exactly right on her assessment of mr ramsey
Not to mention Dave’s advice on buying houses with cash… having zero credit cards… no investing in single stocks… but his advice in general is helpful for financially irresponsible people
You lost me at “I like Dave Ramsey”.
I really like Dave Ramsey's advice, insofar as it was relevant in the 2000s through 2010s when I was getting established. It's basically being very aware of your finances and intentionally living a leaner lifestyle to get out of debt and save. That being said, it's no longer relevant, especially for young people in their 20s-early 30s now. It's still good if you're trying to trim fat off of an already healthy budget as a middle aged or elderly person, but not for young people.
In Dave's defense though, if you're in a low cost mutual fund and not trying to time the market, 10-12% annualized returns as an aggregate are not unrealistic. Even a typical S&P 500 fund would have those returns over the past 15-20 years annualized. Dave's also spot on about term life and is correct in highlighting how bad whole life policies are.
Nailed it. Ramsey is good for reducing, eliminating debt, and structuring a budget. He absolutely sucks in investment and retirement advice. Been doing this for 25 years and I would have lost my book on his advice through tech bubble, real estate bubble, covid, anemic rates, etc.
Just call it what it is. Hes great for getting people out of debt. After that its shaky.
I do not agree with Ramsey's advice on this subject. However, it is true that you COULD withdraw 8% as an initial rate, as long as you are prepared to cut your withdrawals substantially if the market underperforms, and if your lifespan is limited. That being said I have not heard Ramsey give the 8% withdrawal rate suggestion as anything other than universal, so it is faulty advice, to be sure. The correct way to evaluate it (and even that is basing a future estimate on past results) is with the SWD calculations of Bengen et al, of approximately 4%, and even that is often applied too universally without considering tax rates, and portfolio construction, and thus misapplied.
To the withdrawl rate issue. You can take out 8% if your ETF’s are paying you out interest income of 10% or more. Which many are nowadays. Gone are the days where you have to hope the market does well that year so you can sell shares and take your measley 4% out. If you earn covered call income/dividend interest etc and it is generating 10%, you can take out much more without selling shares/selling off your capital/ or what the market does that year if you pick etf’s that are consistent. You can even throw in a few that pay 25% a year to pump up that amount in your portfolio. If they drop to 15% for a year, so what, you can still take out more. I agree with Ramsey to this extent. Depends what you have going on in your portfolio. If you have JNJ and P&G, well sure you can’t pull out that much. You shouldn’t be selling out your shares and hoping the market goes up. Also, if you have extra dividends, reinvest some when the market backs up and that can also help grow your portfolio in times of down rather than depleting it. I am an advisor and this works
Yeah, I agree, an 8% withdrawal rate is not smart. I've been aiming for 4% or so and I'm pretty diversified with our retirement plans. There is no way in retirement that it makes a lick of sense to be 100% into equities.
4% is still way too high
EVERYONE is in a different situation. About five years out from retirement, my 401K had grown to the point (over $1M) that my $20K annual contribution was almost meaningless. IE, if the market took a big downturn, my contributions weren’t going to rebuild it. I was also going to receive a pension of 44% of my salary. The pension, plus SS and a small side hustle would allow me not to dip into the 401K for a few years after retirement. All of these factors convinced me to stay 100% in the S&P500. (I had reached the point of critical mass and could sustain a downturn) My 401 K is now $3.1 Million even though I pull $50K a year now and I’ll be staying fully in the S&P.
I have placed $600,000 in a private equity position in 6 hotels with a friend of mine. I am drawing an average of 19% yearly which pays me $115k/yearly...without touching the equity. This is separate from my 401K. Educate yourselves!
Question for you. Would you take fitness advice from a fat trainer? I think it's a good analogy. A vast majority of these so called certified "FINANCIAL PLANNERS" are not independently wealthy. Do they have enough money in the bank that they don't have to work & their profession is a vocation-a calling-rather than an absolute means to making a living? I have dealt with these guys in the past. They don't care about their clients past getting their hooks in them. Once they have a clients money under THEIR management they have some computer algorithm to help remind them to call their client for an obligatory annual call feigning effort on their behalf. Really they collect a percentage of their clients portfolio annually for just managing it regardless of if it goes up or down in value. As for the clip of the woman excoriating Dave, what does HER PERSONAL FINANCIAL situation look like? No seriously. Is she independently wealthy? You mention an article with a few scholars, PHD's weighing in. What's their net worth? It matters. Just like I wouldn't hire a personal trainer who hasn't been successful in his own fitness journey I would not hire a so called FINANCIAL ADVISOR who doesn't have a multi-million portfolio.
But 100s of those Financial Advisors who you say "cringe" at hearing his name happily pay him $1k+ a month for referrals.
Sometimes, you need to pull down some feathers in order to get your point across. If you're in financial stress 😩 then you might look for someone who MIGHT have some of the answers you have been dying for to calm you down in the right direction. It might be wisdom or just hot air getting you into a cycle of just temporary relief. 🤔
Ramsey is great on basic money management, getting out of debt, and creating a budget. Go someplace else for investment and retirement info.
Ramsey = King of the "below the waterline" debt exterminators and financial behavior managers. And there's a place for that. However, this has little to do with his faltering wealth theories around either the S&P or spend rates.
During the debt snowball Dave does not account for major emergencies especially as a home owner. My emergencies especially repairs are $5,000 minimum. So from my experience Dave hasn't done anything but piss me off repeatedly
Mark Cuban said you can save money by using only cash or saving cash in a mattress. Buy appreciating asset, hold it for a while, sell it. Repeat it. For dummies, make sure your yearly income increase is bigger than rate of inflation.
Dave Ramsey gives good advice as far as home economics get out of debt, the snowball, and he has been bankrupt, now his problem may be that next level of advice. He like kiyosaki, make most from books and podcasts
He hasn't - he just wants everyone to think he has been bankrupt.
I can and do, achieve a more than 4% return on my investments..... 4.5% on my MM savings, which I know isn't permanent. I do expect a "financial expert" to do better than I can, since that's what we're paying those fees for. While Dave is wrong about the 12% thing, I feel that the "Professional Financial Advisor" should earn well above the fees they charge. Unfortunately, I remember my old Passbook savings account with $5.00 in it as a child would yield 5.75%, so there's a pretty high bar expected by me.... LOL Thanks for your insight!
It's not complicated, if spend all your money on debt payments, you will have no money, simple.
Be listened to Dave since around 2005 mostly for the interesting people who call in. The stuff he preaches about debt is mostly common sense. We have spent our whole life living below our means. Dave has been a multi millionaire for too long to relate to regular middle class people. He will make comments like you can earn $1000 a month delivering pizzas before wages spiked or the rich couple who are “killing it” because they are now only living on 80k to get out of debt when the average house doesn’t make that on a good year.
One, if you're swimming in debt then yes Dave Ramsey's program can help as long as you don't mind being called a moron for getting in debt. Second, never listen to Dave Ramsey for investment advice. He's a get out of debt expert not a financial advisor.
If im living to be 150 years old ill only take 4% odds are i won't so ill take up to 8 if i need it.
Dave Ramsey says on his podcast That he has a team of finacial advisors to help with his company and personal finances. And he would not where his is without them.
Dave has never said to 100% invest in the S & P 500.
He’s not the best or worst but he is a help.
So what you’re saying is Dave Ramsey is to financial advice as Dr. Phil is to psychological advice.
Dave Ramsey is a brand. He has a valuable message for many. Unfortunately, his brand is partly founded on giving everyday people hope. Hope that may give you a false sense of sense of security. You can budget and snowball all you want but to have more freedom often you just need to make more money. Yes, you can live paycheck to paycheck making 6 figures. Bottom line: everyone should be deliberate with their money.
Please tell us what investment(s) get an annual 12% rate of return in a consistent, reasonable and sustainable manner ???
Nowhere. Dave ignores sequence risk completely.