Dave Ramsey suggests an 8% withdrawal rate to never run out of money

[Phenix]

Does Dave every really define what "retirement" is in his teaching? I vaguely remember him talking one time about there being no mention of retirement in the Bible and that we shouldn't aspire to do nothing. I am not saying that's the intention of FIRE, as I know many folks here do a great amount of volunteer work after leaving their 9 to 5. I currently have 4 income streams and 2 of them (adjunct professor & coach) I have no intentions of stopping until I can no longer do them. Once my house is paid off and the kids are out of the house, I could feasibly live off of those 2 income sources and barely touch my retirement savings. Dave also speaks of doing work you're passionate about and you'll never have to work another day of your life.

All that to say, 8% could very well be a "safe" withdraw rate in a Dave Ramsey style retirement where you're making money until you're no longer able. Not here to debate the merits of that ideology, but I wouldn't consider his advise too over the top when viewed through that lens.

[ender]

I love listening to the show for entertainment reasons. While he's factually wrong on this, a massive percentage of the time he's telling this to people in their 50s/60s or older who have nothing saved and need hope that what they can save is meaningful.

If you tell someone in their mid-50s who just got out of debt after living their whole life in a screwed up financial state they need to accumulate 25x their annual spending in a decade? That's going to put them in a hopeless situation.

The issue I have with this argument is he isn’t just telling these 50/60 year olds this advice.  He’s broadcasting it out on his show and marketing the hell out of it. Critically, his message doesn’t change then the next caller is a couple in their late 20s who are aggressively paying down their mortgage.  And he does this while being an absolute bully towards anyone who dares to have a different opinion. Two of his most used words are “idiot” and “moron”. 

One thing to consider is a couple in their late 20s who follows his plan exactly is going to retire absurdly rich at 65, so that negative impact is lessened.

Dave is certainly not an advocate of early retirement either, so he likely expects/suggests everyone works until they are 65.

[ChpBstrd]

I love listening to the show for entertainment reasons. While he's factually wrong on this, a massive percentage of the time he's telling this to people in their 50s/60s or older who have nothing saved and need hope that what they can save is meaningful.

If you tell someone in their mid-50s who just got out of debt after living their whole life in a screwed up financial state they need to accumulate 25x their annual spending in a decade? That's going to put them in a hopeless situation.

The issue I have with this argument is he isn’t just telling these 50/60 year olds this advice.  He’s broadcasting it out on his show and marketing the hell out of it. Critically, his message doesn’t change then the next caller is a couple in their late 20s who are aggressively paying down their mortgage.  And he does this while being an absolute bully towards anyone who dares to have a different opinion. Two of his most used words are “idiot” and “moron”. 

One thing to consider is a couple in their late 20s who follows his plan exactly is going to retire absurdly rich at 65, so that negative impact is lessened.

Dave is certainly not an advocate of early retirement either, so he likely expects/suggests everyone works until they are 65.

How else does one stay a Dave Ramsey customer for life? MMM isn't buying DR books.

[GuitarStv]

I've never understood that about people who believe in prosperity gospel.  Do they really believe that there exist no bad rich people?  Seems crazy delusional.

[ChpBstrd]

I've never understood that about people who believe in prosperity gospel.  Do they really believe that there exist no bad rich people?  Seems crazy delusional.

For many people the incentive to believe is the possibility of being able to make trades with an infinitely powerful trading partner. E.g. prayers for health, donations for luck, rituals for outcomes, etc. This is true of all religions.

[Wolfpack Mustachian]

I love listening to the show for entertainment reasons. While he's factually wrong on this, a massive percentage of the time he's telling this to people in their 50s/60s or older who have nothing saved and need hope that what they can save is meaningful.

If you tell someone in their mid-50s who just got out of debt after living their whole life in a screwed up financial state they need to accumulate 25x their annual spending in a decade? That's going to put them in a hopeless situation.

The issue I have with this argument is he isn’t just telling these 50/60 year olds this advice.  He’s broadcasting it out on his show and marketing the hell out of it. Critically, his message doesn’t change then the next caller is a couple in their late 20s who are aggressively paying down their mortgage.  And he does this while being an absolute bully towards anyone who dares to have a different opinion. Two of his most used words are “idiot” and “moron”. 

One thing I'd really be curious to know is if Dave actually believes in the 8% approach himself. Or would say it's mostly a behavioral thing. I suspect his team is dogmatic about it because Dave is, honestly. I rarely have gotten any semblance of deep financial understanding from most of the Dave Ramsey Show non-Dave folks.

That’s always the question - does the demagogue believe in his own rhetoric. I suspect Dave really doesn’t get the financial side at all, and reacts to it the way that many do for any subject that the have poor aptitude for - by steering away from it and shutting it off whenever it comes up (which is basically what happens each and every time it comes up on his show).  He’s also a proponent of the prosperity gospel, and believes his financial success is a reward from God for doing good. This belief reaffirms that his teachings must please God, and therefore be correct.

Whether or not he believes in it, in a way is irrelevant. As far as I know, his belief hasn't been put to the test. One of the best things about this forum is taking to people who have retired and who are loving off of what they've saved. They're living their convictions. He is awash in money. Even he doesn't know for sure how he'd live or what he'd be comfortable with because he hasn't lived it.

[erp]

Just because no one has linked it yet, Early Retirement Now has a pretty thorough and thoughtful examination of the claim:
https://earlyretirementnow.com/2023/11/12/dave-ramsey-8-percent-withdrawal-rate/

Tl;dr - of course it's terrible. 8% is not a SWR. Not even close.

[kpetar]

Dave Ramsey is a marketing expert. He knows there's no clear-cut 'good' or 'bad' in marketing. If he thinks suggesting something like quitting high school will get people talking and in the media, he will do it.

[Chris Pascale]

I've never understood that about people who believe in prosperity gospel.  Do they really believe that there exist no bad rich people?  Seems crazy delusional.

God! Don't you get it? We all get mansions, and there's roads made of gold.

What you donate goes into an account in Heaven, and collects interest.......because there's money in Heaven.......which totally makes sense.

[Chris Pascale]

Dave Ramsey is a marketing expert. He knows there's no clear-cut 'good' or 'bad' in marketing. If he thinks suggesting something like quitting high school will get people talking and in the media, he will do it.

There's definitely good and bad in marketing @kpetar. You can tell the truth about something's benefits, and that's good. You can claim something that's going to lead to harm, and that's bad.

Avoiding off-topic items like opioids, sugar, and the Chris Hogan book, Everyday Millionaires, which was a waste of both time and money when it was pitched as a level-up on The Millionaire Next Door, let's just stick to the 8% withdrawal rate. The data suggest it may not survive a 30-year retirement based on what we know with many more decades of metrics than that.

That is bad.

If someone says, 'but it gets people talking about the subject,' no need to worry. This is a concept Dave is late to. He can tag on with the right information instead of trying to reformat something that he is wrong about.

One thing I'll say is that an 8% withdrawal rate would probably work for me simply because I won't live 30 years past my actual retirement from the workforce. I'd like to leave the fed gov't in 6-7 years, but it'll be a move into teaching, which I may do until I'm 60-65 before I make my next move, if I have one. But, for me, 8% would be too high because I'll have earned income and, I think, lower expenses because the kids will all be adults.

[Turtle]

Just for grins, I decided to play with my stash numbers and the Rich, Broke, Dead calculator.

At 8% with no spending flexibility, it only has a 13% success rate.  And that's with tiny pension and Social Security factored in which is covering 2% of that 8% after I start taking it.

However, since my lean fire expenses can easily be covered with about 3% and my fluffy fire is fine at 4%, I started playing around with spending flexibility numbers.

If I change the Flexibility numbers to cut back spending any time the stash falls below 100% of start, and I cut back spending 50% (back to 4% withdrawal rate) RBD goes from 13% success to 100% success. 

My guess is that most people who listen to Dave Ramsey don't have the freedom or flexibility to just cut their expenses in half when the market is down, though

[clarkfan1979]

Just because no one has linked it yet, Early Retirement Now has a pretty thorough and thoughtful examination of the claim:
https://earlyretirementnow.com/2023/11/12/dave-ramsey-8-percent-withdrawal-rate/

Tl;dr - of course it's terrible. 8% is not a SWR. Not even close.

Dave Ramsey went on the extreme a few weeks later and doubled down on the 8% SWR. He is getting push back from many people in the financial media space. Any chance he takes a financial hit from this by losing followers?  Or maybe it's possible that he is too big to fail.

[ixtap]

Just because no one has linked it yet, Early Retirement Now has a pretty thorough and thoughtful examination of the claim:
https://earlyretirementnow.com/2023/11/12/dave-ramsey-8-percent-withdrawal-rate/

Tl;dr - of course it's terrible. 8% is not a SWR. Not even close.

Dave Ramsey went on the extreme a few weeks later and doubled down on the 8% SWR. He is getting push back from many people in the financial media space. Any chance he takes a financial hit from this by losing followers?  Or maybe it's possible that he is too big to fail.

It is just more publicity. And encourages his followers to use his approved advisors because they can achieve what everyone else says it is impossible. But everyone else doesn't have God on their side.

[weebs]

Just for grins, I decided to play with my stash numbers and the Rich, Broke, Dead calculator.

At 8% with no spending flexibility, it only has a 13% success rate.  And that's with tiny pension and Social Security factored in which is covering 2% of that 8% after I start taking it.

However, since my lean fire expenses can easily be covered with about 3% and my fluffy fire is fine at 4%, I started playing around with spending flexibility numbers.

If I change the Flexibility numbers to cut back spending any time the stash falls below 100% of start, and I cut back spending 50% (back to 4% withdrawal rate) RBD goes from 13% success to 100% success.

My guess is that most people who listen to Dave Ramsey don't have the freedom or flexibility to just cut their expenses in half when the market is down, though

Great idea.  When in doubt, run a couple simulations.  :-)  I did the same using firecalc.  Simulation details:

* Withdrawal rate - 8%.
* Current age - 50, retiring in 21 months.
* Spending model - "Percentage of Remaining Portfolio" spending model with a minimum spend of 50% of the prior year.
* Includes my SS (62), DH's SS (65) and our pensions (65).
* 30 year window.

The above resulted in portfolio larger than the initial portfolio 71% of the time.  Reducing the withdrawal rate to 6% resulted in a larger than initial ending portfolio ~95% of the time.  I like using a flexible spending model with a minimum spend because it's more representative of reality.

Despite the positive outcomes of the above scenario, I think a flat 8% withdrawal rate is a recipe for pain, especially for the younger FIRE contingent.  Our SS and pensions provide *a lot* of padding that many folks don't have.

[Chris Pascale]

Just because no one has linked it yet, Early Retirement Now has a pretty thorough and thoughtful examination of the claim:
https://earlyretirementnow.com/2023/11/12/dave-ramsey-8-percent-withdrawal-rate/

Tl;dr - of course it's terrible. 8% is not a SWR. Not even close.

Dave Ramsey.......doubled down

He always does.

In the old days you could only switch Dave off for so long before you got tired of hearing Clark Howard tell you to freeze your credit and get a will. Now, we have more options than Clark and a guy who is repeatedly making bad business decisions:

- Chris Hogan
- Jon Acuff
- Advising 8% withdrawals
- Pulling a gun out at meetings
- Trying to suppress Freedom of the Press
- Calling Chris Hogan's wife a "bitch"
- Calc-ing (to justify firing) that a married woman may have had sex before her wedding based on her due date being under 9 months from the ceremony
- Forcing RTW instead of maximizing productivity

But hey, what if he's only half wrong?

[RWD]

But hey, what if he's only half wrong?

Soooo, a 4% SWR?

[JupiterGreen]

I love listening to the show for entertainment reasons. While he's factually wrong on this, a massive percentage of the time he's telling this to people in their 50s/60s or older who have nothing saved and need hope that what they can save is meaningful.

If you tell someone in their mid-50s who just got out of debt after living their whole life in a screwed up financial state they need to accumulate 25x their annual spending in a decade? That's going to put them in a hopeless situation.

The issue I have with this argument is he isn’t just telling these 50/60 year olds this advice.  He’s broadcasting it out on his show and marketing the hell out of it. Critically, his message doesn’t change then the next caller is a couple in their late 20s who are aggressively paying down their mortgage.  And he does this while being an absolute bully towards anyone who dares to have a different opinion. Two of his most used words are “idiot” and “moron”. 

One thing I'd really be curious to know is if Dave actually believes in the 8% approach himself. Or would say it's mostly a behavioral thing. I suspect his team is dogmatic about it because Dave is, honestly. I rarely have gotten any semblance of deep financial understanding from most of the Dave Ramsey Show non-Dave folks.

That’s always the question - does the demagogue believe in his own rhetoric. I suspect Dave really doesn’t get the financial side at all, and reacts to it the way that many do for any subject that the have poor aptitude for - by steering away from it and shutting it off whenever it comes up (which is basically what happens each and every time it comes up on his show).  He’s also a proponent of the prosperity gospel, and believes his financial success is a reward from God for doing good. This belief reaffirms that his teachings must please God, and therefore be correct.

This part of it makes me sick to my stomach because he is exploiting some good hard working people. Ramsey is a bloviating charlatan who has weaponized religion for personal profit. If I could "reverse Uno" one thing in the history of the US it would be the rise of these j-holes who used god as their weapon and justification to steal, cheat, rule, and ravage other humans and the earth. They know what they are doing. They are the worst.

[ixtap]

I love listening to the show for entertainment reasons. While he's factually wrong on this, a massive percentage of the time he's telling this to people in their 50s/60s or older who have nothing saved and need hope that what they can save is meaningful.

If you tell someone in their mid-50s who just got out of debt after living their whole life in a screwed up financial state they need to accumulate 25x their annual spending in a decade? That's going to put them in a hopeless situation.

The issue I have with this argument is he isn’t just telling these 50/60 year olds this advice.  He’s broadcasting it out on his show and marketing the hell out of it. Critically, his message doesn’t change then the next caller is a couple in their late 20s who are aggressively paying down their mortgage.  And he does this while being an absolute bully towards anyone who dares to have a different opinion. Two of his most used words are “idiot” and “moron”. 

One thing I'd really be curious to know is if Dave actually believes in the 8% approach himself. Or would say it's mostly a behavioral thing. I suspect his team is dogmatic about it because Dave is, honestly. I rarely have gotten any semblance of deep financial understanding from most of the Dave Ramsey Show non-Dave folks.

That’s always the question - does the demagogue believe in his own rhetoric. I suspect Dave really doesn’t get the financial side at all, and reacts to it the way that many do for any subject that the have poor aptitude for - by steering away from it and shutting it off whenever it comes up (which is basically what happens each and every time it comes up on his show).  He’s also a proponent of the prosperity gospel, and believes his financial success is a reward from God for doing good. This belief reaffirms that his teachings must please God, and therefore be correct.

This part of it makes me sick to my stomach because he is exploiting some good hard working people. Ramsey is a bloviating charlatan who has weaponized religion for personal profit. If I could "reverse Uno" one thing in the history of the US it would be the rise of these j-holes who used god as their weapon and justification to steal, cheat, rule, and ravage other humans and the earth. They know what they are doing. They are the worst.

Profiteering off temple practices is the one thing Jesus himself lost his temper over!

[Chris Pascale]

But hey, what if he's only half wrong?

Soooo, a 4% SWR?

Looking at it, I'm remembering his justification was "what if I'm only half right" not half wrong.

He'd be like, 'well, then you made 6% on your money' and humbly took all the credit on this hypothetical under-performing fund.

[nereo]

But hey, what if he's only half wrong?

Soooo, a 4% SWR?

Looking at it, I'm remembering his justification was "what if I'm only half right" not half wrong.

He'd be like, 'well, then you made 6% on your money' and humbly took all the credit on this hypothetical under-performing fund.

So, what happens if you go only half-bankrupt in your retirement? Is that 50% successful?

[ChpBstrd]

Dave replies to his critics:

“There are some really stupid people that write financial articles all over the internet,” he said. “They run all these numbers out in great detail on math and they do not grasp that life will never, ever happen the way they laid it out.”

Ramsey argues that the “math nerds” who write finance articles offer overcomplicated advice. However, simple “sixth-grade math” is sufficient for ordinary savers to achieve a comfortable retirement.

“These guys, when they’re writing these financial articles, act like if you miss [something] by 0.2% you’re not going to make it,” he said. “You can’t forecast this within 0.2%. Unless you’re God, you don’t know what’s going to happen. And I promise you, God is not writing financial articles.”

https://www.aol.com/heres-whats-stupid-them-dave-133000623.html?ref=biztoc.com

Now my brain hurts and I've lost confidence in humanity, because a best selling personal finance author followed by millions of people thinks his competitors who use spreadsheets instead of simplistic heuristics are "math nerds". Perhaps this is a case of IND (Internet Narcissistic Derangement) and I have to wonder if he goes to "medical nerds" when sick, "mechanical nerds" when his cars break down, or "legal nerds" when people sue him.

[jinga nation]

To paraphrase a line from Jack Bogle: I may not have as much money as him, but I have something he never will - enough.

Jack Bogle (RIP) >>> Dave Ramsey.
Always and forever.

[jinga nation]

But hey, what if he's only half wrong?

Soooo, a 4% SWR?

Y'all gots it wrongs. Mister Ramsey sayed he double-down on the 4% SWR.
2 times 4% = 8%.
That's how he got that number, ya interweb geniuses. Duh!

/s

[Sandi_k]

To paraphrase a line from Jack Bogle: I may not have as much money as him, but I have something he never will - enough.

To be pedantic, that quote is attributed to Joseph Heller, speaking to Kurt Vonnegut. Bogle loved the quote, but didn't originate it.

[Chris Pascale]

To paraphrase a line from Jack Bogle: I may not have as much money as him, but I have something he never will - enough.

To be pedantic, that quote is attributed to Joseph Heller, speaking to Kurt Vonnegut. Bogle loved the quote, but didn't originate it.

Thank you for that. Fun off-topic story: My youngest (12) read Catch-22 and now goes by Pascal Pascale. If you don't know the reference, there's a character by the name of Major Major, and they promote him to Major. He wants to ask if they promoted him based on merit or because they think he's a schmuck. The catch here is that he can't ask because asking would prove the latter.

[Chris Pascale]

But hey, what if he's only half wrong?

Soooo, a 4% SWR?

Y'all gots it wrongs. Mister Ramsey sayed he double-down on the 4% SWR.
2 times 4% = 8%.
That's how he got that number, ya interweb geniuses. Duh!

/s

Dang. You got me.

[GuitarStv]

To paraphrase a line from Jack Bogle: I may not have as much money as him, but I have something he never will - enough.

To be pedantic, that quote is attributed to Joseph Heller, speaking to Kurt Vonnegut. Bogle loved the quote, but didn't originate it.

Thank you for that. Fun off-topic story: My youngest (12) read Catch-22 and now goes by Pascal Pascale. If you don't know the reference, there's a character by the name of Major Major, and they promote him to Major. He wants to ask if they promoted him based on merit or because they think he's a schmuck. The catch here is that he can't ask because asking would prove the latter.

Catch-22 is a book with fantastic ideas, but I was always on the fence if it was poorly or well written.