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Dave Ramsey Investing Advice

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jakester03
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5:06p, 11/9/23
AG
Seeing this all over X/Twitter. What do ya'll think?

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permabull
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5:19p, 11/9/23
AG
He has a long history of pushing high fee and load funds and claiming a 10%+ withdrawal rate is safe. It's not worth fighting it because he has so many passionate fans that will defend him.
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Ags2013
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5:29p, 11/9/23
AG
I don't always agree with Dave but I do here
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ac04
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5:38p, 11/9/23
the vast majority of his advice does not apply to me at all but i'm actually a big fan of what he's trying to do in general. a shocking and embarrassing percentage of people are completely financially illiterate. anything that can help prevent me from supporting them in the future is a positive.
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Monywolf
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In reply to ac04 • 5:55p, 11/9/23
ac04 said:
the vast majority of his advice does not apply to me at all but i'm actually a big fan of what he's trying to do in general. a shocking and embarrassing percentage of people are completely financially illiterate. anything that can help prevent me from supporting them in the future is a positive.
The "financial advice" in the clip is a complete joke. He completely disregards sequence of returns among other things.
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SquareOne07
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6:12p, 11/9/23
AG
Damn, that's awful advice. Wow.

I'm not sure why he's so angry about the common suggestion of ~5%. He's irrationally angry.

First of all, lol @ a long term expected return of 12% net of fees/taxes/etc.

Perhaps most importantly, as somebody else mentioned, he neglects periods of downturn. If he's willing to invest in a way to pursue 12% returns, he's willing to invest in a way to suffer 15% losses. He's ok with a 10% draw off a $1M…one bad year like '22 and his 10% draw rate is suddenly 12%.

Dangerous advice.
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12thMan9
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6:37p, 11/9/23
AG
Dave Ramsey doesn't give investment advice. Period.
Ronnie '88
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Monywolf
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In reply to 12thMan9 • 6:38p, 11/9/23
12thMan9 said:
Dave Ramsey doesn't give investment advice. Period.
At least not appropriate investment advice.
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fka ftc
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7:35p, 11/9/23
I apologize as I am not in a place where I can watch the clip, but is he suggesting higher % withdrawals "early" in retirement then lowering and mixing in with SS and other solutions?

I am not at retirement age but may be in a position to cut it way back. We plan to spend at a much higher rate in our 50's, then ratchet down in our 60s and in our 70s it's mostly visiting grandkids and watching Hannity reruns.

I have read exactly one Ramsey book in my life, in my early 20s. "More than Enough" if I recall. For a young man with his sights on marriage and a family, I took the nest building bit to heart and I can say it has worked out nicely, and when I forgot about my nest it deteriorated. When I focused on it, our family flourished, and not financially by in the best way it can.

There is not set path to financial success and freedom. No true shortcuts either.

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Ag92NGranbury
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7:57p, 11/9/23
AG
hey dave...

monte carlo says howdy
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nactownag
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8:05p, 11/9/23
AG
I love Dave but he's been wrong about this from day one. There's many things advisors disagree on but no one would agree with taking 10% withdrawals since market has returns that historically. See what would have happened to those that retired in 1999.

Not sure why he's so strongly opinionated on this.
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jja79
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9:08p, 11/9/23
AG
In the past he pushed Churchill Mortgage which had the highest rates and fees in the market. Probably was getting paid.
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Ragoo
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9:15p, 11/9/23
AG
The caller is asking about a FI number.

Wouldn't using a 3% withdraw rate make the FI number much lower?

Using 8% forces the caller to evaluate the current savings rate and timeline for achieving FI?

What is the issue with the more conservative approach?
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Casey TableTennis
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In reply to Ragoo • 11:29p, 11/9/23
AG
Ragoo said:
The caller is asking about a FI number.

Wouldn't using a 3% withdraw rate make the FI number much lower?

Using 8% forces the caller to evaluate the current savings rate and timeline for achieving FI?

What is the issue with the more conservative approach?


You are misunderstanding. This is a very aggressive approach. One in which a single family is not able to rely on law of large numbers to smooth things out.

A low withdrawal rate is low spending relative to wealth, or less "enjoyment" of assets or time due to more focus on saving. Higher withdrawal rate needs less critical mass, but has less cushion for real or behavioral problems.

IMO he is simply speaking different than the masses/science to attract market share.

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BenTheGoodAg
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9:33a, 11/10/23
AG
I think Dave does so much good in so many areas of finance for so many people, especially in his books and classes. But I don't agree with him at all on this topic and it's a really sad outburst on his part.

Dave is always talking about hiring a financial advisor "with a heart of a teacher". That attitude clearly isn't present here.
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MyNameIsJeff
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9:51a, 11/10/23
AG
I just commented on this exact thing in the ChooseFI group on FB. I then realized I hadn't checked the B&I forum this morning, which led me here. So I'll say the same thing I said there.

Dave is great for people that are bad with money. Once you get your ship righted, he becomes largely irrelevant. But that's why he's so popular because so many people are bad with money.
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MyNameIsJeff
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In reply to Ragoo • 9:55a, 11/10/23
AG
Ragoo said:
The caller is asking about a FI number.

Wouldn't using a 3% withdraw rate make the FI number much lower?

Using 8% forces the caller to evaluate the current savings rate and timeline for achieving FI?

What is the issue with the more conservative approach?

No. Say your annual expense in retirement are $100,000. At a 3% SWR, you would need $3,333,333 (repeating, of course) invested in the market. 100,000/.03

At 8% SWR, you would only need $1,250,000. 100,000/.08

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Ragoo
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In reply to MyNameIsJeff • 10:03a, 11/10/23
AG
MyNameIsJeff said:
Ragoo said:
The caller is asking about a FI number.

Wouldn't using a 3% withdraw rate make the FI number much lower?

Using 8% forces the caller to evaluate the current savings rate and timeline for achieving FI?

What is the issue with the more conservative approach?

No. Say your annual expense in retirement are $100,000. At a 3% SWR, you would need $3,333,333 (repeating, of course) invested in the market. 100,000/.03

At 8% SWR, you would only need $1,250,000. 100,000/.08

not if you are wanting it to last for a certain number of years
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JuanDurfel
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10:10a, 11/10/23
AG
sounds like DR is spending too much time on those reddit threads too.

"3% is moronic. Get off reddit. Market only goes BRRRR"
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JDCAG (NOT Colin)
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In reply to Ragoo • 10:15a, 11/10/23
AG
Ragoo said:
MyNameIsJeff said:
Ragoo said:
The caller is asking about a FI number.

Wouldn't using a 3% withdraw rate make the FI number much lower?

Using 8% forces the caller to evaluate the current savings rate and timeline for achieving FI?

What is the issue with the more conservative approach?

No. Say your annual expense in retirement are $100,000. At a 3% SWR, you would need $3,333,333 (repeating, of course) invested in the market. 100,000/.03

At 8% SWR, you would only need $1,250,000. 100,000/.08

not if you are wanting it to last for a certain number of years


Not sure I'm tracking your argument, but Dave is definitely endorsing a more aggressive approach, telling the person that they can survive with an 8% rate because their principal will remain intact at that pull rate.

Caller was running the numbers with 3%, which would require a much bigger nest egg (if 3% of X == 8% of Y, then X is obviously a much bigger number)

Maybe I'm misunderstanding what you're saying
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Medaggie
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10:19a, 11/10/23
No Advice is perfect as there is a spectrum of financial situations.

His advice is probably one of if not the best if you take everyone's situation as an aggregate. It is poor advice for those financially literate and wealthy but these people do not need financial advice. It is for 90% of Americans who have no idea about money, investing, etc.

Now his 10% withdraw rate goes against most every conservative positions he has. Even his co-host (daughter right?) questioned him only to be talked down to.

10% withdraw rate is mind blowing and dumb.

1Mil taking 10% out a year. Assuming a 10% historic return. He is missing decay.

Year 1, take 100K out live on day 1 - 900K. Market up 90K leaves him at 990k
Year 2. Take 99K out to live on day 1...... You get the point.

Where he really screws up is what if in year 1 the market goes down 20% then he is left with 720K starting year 2.

Another idea I hate is not levering mortgages when rate was below inflation. It is dumb for monetarily literate people to pay $500K cash for an investment property. Yes, for illiterate people it is prob the right thing to do but not if you want to accelerate wealth.
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MyNameIsJeff
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In reply to Ragoo • 11:14a, 11/10/23
AG
Ragoo said:
MyNameIsJeff said:
Ragoo said:
The caller is asking about a FI number.

Wouldn't using a 3% withdraw rate make the FI number much lower?

Using 8% forces the caller to evaluate the current savings rate and timeline for achieving FI?

What is the issue with the more conservative approach?

No. Say your annual expense in retirement are $100,000. At a 3% SWR, you would need $3,333,333 (repeating, of course) invested in the market. 100,000/.03

At 8% SWR, you would only need $1,250,000. 100,000/.08

not if you are wanting it to last for a certain number of years
Right, which is why no one suggests an 8% withdrawal rate and why the 25x rule (4% SWR) is a common rule of thumb among the FI community.

I forgot the who did the studies, but 4% withdrawal has very high odds of success over a 30 year retirement. And, honestly, should be successful indefinitely.

Edit: The Trinity Study is what I was thinking of.
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Ragoo
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In reply to JDCAG (NOT Colin) • 11:29a, 11/10/23
AG
JDCAG (NOT Colin) said:
Ragoo said:
MyNameIsJeff said:
Ragoo said:
The caller is asking about a FI number.

Wouldn't using a 3% withdraw rate make the FI number much lower?

Using 8% forces the caller to evaluate the current savings rate and timeline for achieving FI?

What is the issue with the more conservative approach?

No. Say your annual expense in retirement are $100,000. At a 3% SWR, you would need $3,333,333 (repeating, of course) invested in the market. 100,000/.03

At 8% SWR, you would only need $1,250,000. 100,000/.08

not if you are wanting it to last for a certain number of years


Not sure I'm tracking your argument, but Dave is definitely endorsing a more aggressive approach, telling the person that they can survive with an 8% rate because their principal will remain intact at that pull rate.

Caller was running the numbers with 3%, which would require a much bigger nest egg (if 3% of X == 8% of Y, then X is obviously a much bigger number)

Maybe I'm misunderstanding what you're saying
there is a lot of missing information in the conversation.

The caller is clearly hunting for a final nest egg number target.

We don't know how long they need the money to last or the target income. So we can't really determine what final number they need. So we don't know if 3 or 8 percent is aggressive or conservative.
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Stive
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12:50p, 11/10/23
AG
The studies are actually trending down from 4% to closer to 3% after the last 15+ years of historical data. The newest studies that are including the reduced fixed income rates over the last decade are illustrating that some of the more conservative portfolios are struggling to sustain a 4% number over a 30 year period, especially when you throw in a strong inflationary run up like the last few years have included.

For all the good that Dave has done by telling people not to spend more than they make he can be a freaking idiot when it comes to a lot of aspects of financial planning.

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Algorithmic Epiphany
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2:30p, 11/10/23
Dave is great, for some things.
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ATM9000
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3:30p, 11/10/23
AG
I've worked for over 20 years in jr and sr levels in different trading, finance and risk management jobs. Obviously things like this interest me. I don't know everything about personal finance and investing but I do know a lot. And yeah… Dave's not right here. That said, there's a couple of things I've learned in my career:

1. Money is boring. Not to me but to most. Everybody wants more of it but nobody wants to talk about it because it is boring. And even a lot of people who know a lot about money and markets have no interest in listening to people talk about the finer points of it.

2. Knowing point 1, how do you stand a chance in hell getting people who know nothing about money to understand Monte Carlo, path dependency, sequence of returns etc.

3. With point 1 and 2 in mind, sometimes being 75% accurate is better than being 100% pedantic.

This is why Dave Ramsey and his message is still really powerful. It's easy to understand and implement. The center of his message are things that are easily actionable. He makes money management unintimidating. And the inherent thing about when something that you want becomes not intimidating and not boring is it opens the door to people being curious about it and wanting to learn more. I always laugh when people say most of Dave's advice just doesn't apply to me… because usually that means you probably quietly and innately are following most of what Dave Ramsey preaches.
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Z3phyr
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3:33p, 11/10/23
Dave is good for people bad with money and bad for people good with money. Still fun to listen to sometimes for entertainment but Money Guys have a much more advanced formula for wealth building.
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SF2004
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4:40p, 11/10/23
AG
Financial Advisors do not like DR because it makes their job more useless than it already is. Derp charge fees to tell people to invest in SPY derp.

DR has good advice for people who are bad with money (ie everyone not on this forum).

B&I on TexAgs has zero concept of the real world and think you are lol poor if you don't have at least $400 million in your 401k by they time you are 30.
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SquareOne07
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In reply to SF2004 • 4:52p, 11/10/23
AG
SF2004 said:
Financial Advisors do not like DR because it makes their job more useless than it already is. Derp charge fees to tell people to invest in SPY derp.

DR has good advice for people who are bad with money (ie everyone not on this forum).

B&I on TexAgs has zero concept of the real world and think you are lol poor if you don't have at least $400 million in your 401k by they time you are 30.


Sounds like you probably need a better FA
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JohnLA762
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9:41a, 11/11/23
AG
Dave Ramsey is the Joel Osteen of the financial world. There is a reason he isn't a fiduciary. The fact that he has such a cult following shows how successful of a marketer he is…
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Brian Earl Spilner
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11:06a, 11/11/23
AG
DR is basically only good for getting out of debt. Beyond that, he is terrible.

And even for that, he doesn't always give the best advice.
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Petrino1
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11:30a, 11/11/23
I read Ramsey's book, The Total Money Makeover, when I was young and in debt. I utilized the methods he talked about in the book to pay off around $20k worth of combined debt after graduating college. With that said, I would never take his advice on investing.

He is great for people who are horrible with money and have lots of debt. He is not so great for those who are financially savvy with no debt.
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BoydCrowder13
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11:31a, 11/11/23
Ramsey's best advice is regarding behavior.

Most people have no self control around spending, no budget, let debt pile up. His basics and savings advice are great for these people.

But yea he is obviously 100% against debt in all situations (regardless of 2.5% mortgage rates a few years back). And at the same time he advocates being 100% invested in stocks in 4 simplistic buckets. And projected 12% returns in perpetuity. With no real tax advice beside "contribute to a Roth".

So he is ultra conservative around debt and crazy risky around investing. Kind of a weird combo.

I see his value to most people but he certainly has blind spots.
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AggiEE
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3:53p, 11/11/23
Remember: Dave Ramsey was an arrogant, overconfident person that went through bankruptcy for not understanding risk.

He still doesn't understand risk. The only lesson he learned was to not get into massive debt. But he's utterly clueless on sequence of return risk, asset allocation, and expected returns.
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CaptnCarl
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In reply to AggiEE • 9:58p, 11/11/23
AG
He's also still arrogant.
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