At 46, it Hannity is on TV still when I am in my 60s, may have to watch out of respect!

But yes, grandkids sound way funner.

CaptnCarl said:

---

He's also still arrogant.

---

To me it seems he immediately gets defensive when someone from the FI community (or anyone who clearly knows what they're doing) calls in, because he wants to appear to know better than they do.

These guys are great to listen to and have good advice. They speak to the crowd that is good with money, and they speak to the crowd that is not good with money. Have really enjoyed them.

12% withdrawal assumption is way too risky.

His point about retirement planners being overly conservative and discouraging is valid. I have a 401K with Fidelity at work and every retirement simulation I've ever run, their estimates the withdrawals way too high and gives below average and significantly below average rates of returns in the models and shows a large gap in funds. I don't think Fidelity is motivated to make me plan better, I think they want to maximize the size of the portfolio because that's how they make money, through management fees.

I'm not saying that's not a valid analysis for a SHTF scenario; but his larger point that a plan is a plan. For people who are thinking about this now, they are going to do better than average on income growth and also "need" less in retirement as you shouldn't have a whole lot of liabilities at that point.

Most of the quidance out there from FP assumes putting the money in low risk fixed income at retirement and preserving the nest egg without hitting principal. I agree with Ramsey's point that this is an overly conservative analysis and the truth is somewhere in the middle for most time periods.

Gordon Bombay said:

---

These guys are great to listen to and have good advice. They speak to the crowd that is good with money, and they speak to the crowd that is not good with money. Have really enjoyed them.

---

Brian is great but Beau is hard to listen to. He has good knowledge but his delivery is annoying to me

A target date fund for a 40 year old (i.e. Target 2050) would be 90% equities right now. I think it's fine if you'd rather be 100% equities than 90%, but I wouldn't call a portfolio of 90% equities "overly conservative." In some of my past 401K plans, the target date funds were the only means to get international equities exposure at any kind of reasonable expense ratio.

TriAg2010 said:

---

A target date fund for a 40 year old (i.e. Target 2050) would be 90% equities right now. I think it's fine if you'd rather be 100% equities than 90%, but I wouldn't call a portfolio of 90% equities "overly conservative." In some of my past 401K plans, the target date funds were the only means to get international equities exposure at any kind of reasonable expense ratio.

---

I'll throw you one that people will call overly conservative.

Goldmans highest risk allocation only has 82.5% in equities. They changed their risk spectrum around 3 years ago and shifted the whole ladder to be much more conservative.

SouthAustinAgSwag said:

---

One element of Dave's investment advice that I agree with is that, in general, you should be nearly 100% equity investor for the bulk of your working life. Yes it will go up and down but I think (for the majority of investors) products like Target Date funds are really stupid. They are overly conservative. I'm almost 40 and I am 100% in equities right now, with the exception of the my oldest son's 529 (he's a HS freshman). Yes the market goes up and down but inflation will eat you alive if you are mostly concerned with wealth preservation while you're still working and earning an income. There will come a time to get much more conservative, but that is at least 10 years away for me. I also agree with Dave that just about all consumer debt is stupid - including car debt. Pay cash for a cheaper car rather than having a car payment. I've never had a car payment and it's one of the reasons why I have a really solid net worth.

Outside of that, he's full of crap on a lot of things. He makes a fortune on his referrals to "SmartVestor Pros" who get commissions off actively managed funds. He says it's "not that hard" for an active fund manager to beat the S&P which is a load of crap and the statistics bear that out. Index funds are the way to go. And an 8% withdrawal rate is even more insane.

Side note - I've met him before and he's actually a nice person one on one.

---

I am of the same mindset as you regarding equities, but I am much older. I am running as close to 100% equities as I can. In 4 years, I will need to decide whether to retire or not, as my office lease space will need to be renewed. Just curious, what/when do you plan to reduce the percentage of equities in your portfolio? Also, for others in the thread, Ramsey's 8% withdrawal rate is obviously not what most feel is safe. What is anyone else being told is a "safe" rate of withdrawal, or what is anyone else doing? My IDEAL plan is to withdraw down to a certain amount and leave that in my will, not leave the entire balance I have in my retirement portfolio, nor leave nothing for the next generation(s). Of course, God only knows how long I will live.

permabull said:

---

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.

---

it seems pretty easy to simply look back at the AVERAGE of every year for the last 90 years and see what the actual general rate of return was.

I thought it was around 4-5% average growth per year looking at the entire stock market.

weird that all of a sudden Ramsay is claiming it's fine to withdraw 8% of your savings every year.

gotta reinvest those dividends

Looks like Trump just went on Dave Ramsey's podcast.

Stive said:

---

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.

---

It's still overwhelmingly safe at 4%.

The only problem with 4% is if you can't adjust. The idea is to be able to live off 2.3-2.7% (somewhere in that range) IF NECESSARY, but then some years you can spend 5-6%. If you pay attention, you can make an average of even more than 4% last forever. You could probably average 5-6% if you do things right and adjust below 4% when necessary.

You just don't want to set a flat 4% rate year in and year out with zero ability to adjust. In general, there is ZERO reason one should have to live off 3% year in and year out. You can probably live off 5% more often than not, and adjust down to 2.7 / 3 / 3.5% or whatever is necessary. Of course, again, many aren't financially savvy enough to pull this off and adjust.

I'm retired early and so far I have been living off around 2.7% of my pre retirement balance since the 4% rule is for a 30 year retirement and I might live 40-50 more years. But with the stock market gains, if I keep my withdrawal rate the same I would only be doing about 2.3%. It's tempting to simply up my withdrawal to 3% but I think that goes against the idea of sequence of return risk. I should probably just stay the course and only do an inflation adjusted increase based on the value of my portfolio from the day I retired since I might just be lucky with having a good year for my first year in retirement. It's tempting to just pretend like I retired this year and set the withdrawal rate as if today's balance though.

Don't all of these percentages assume you have a nice chunk of retirement? At least $1.5M? 4% of that would be $60,000, or $5,000/month.

stonksock said:

---

I'm retired early and so far I have been living off around 2.7% of my pre retirement balance since the 4% rule is for a 30 year retirement and I might live 40-50 more years. But with the stock market gains, if I keep my withdrawal rate the same I would only be doing about 2.3%. It's tempting to simply up my withdrawal to 3% but I think that goes against the idea of sequence of return risk. I should probably just stay the course and only do an inflation adjusted increase based on the value of my portfolio from the day I retired since I might just be lucky with having a good year for my first year in retirement. It's tempting to just pretend like I retired this year and set the withdrawal rate as if today's balance though.

---

The safe withdrawal rate assumes you start at a certain percentage and increase it every year with inflation.

My understanding is you start with 4% then keep taking the same amount adjusted for inflation each year regardless of market performance. So assuming $40k year one on a million you take 41.2k (3% more for inflation year 2) but if the market was bad year one in retirement your nest egg might be down to $900k which would be a 4.6% withdrawal rate. Conversely if the maket did well your first year in retirement and the portfolio grew to $1.1 million despite taking 40k out, sticking to 41.2k for year two would only be a 3.75% withdrawal rate.

After a good year it's tempting to just jump back up to 4%

At a 4% withdrawal rate I'm assuming you would never lose principal? That is a great goal, but is there not a scenario where you slowly draw down the principal?

My goal is not necessarily to just leave $8M to my kids when I die.

The original study looked at every 30 year period of the stock market assuming a 50/50 stock/bond portfolio and it never ran out of money. Some samples it got extremely close to running out and in other samples it ended with an insane balance. It's more of a rule of thumb to get a ballpark number on how much you need to save and not so great as a real world spending in retirement.

I guess I don't understand how you can't get a pretty much guaranteed 4% return in the bond market?

You can today, but 3 years ago you couldn't

harge57 said:

---

At a 4% withdrawal rate I'm assuming you would never lose principal? That is a great goal, but is there not a scenario where you slowly draw down the principal?

My goal is not necessarily to just leave $8M to my kids when I die.

---

I have the same question. I would like to know if there is an easy to use calculator that would let you plug in X in retirement funds to start drawing from at 65 years of age and let you burn all of the principal over your projected lifespan(s) and leave 0.2X or whatever you want to your heirs. I'd really be interested in playing around with those numbers, because that's a more realistic goal for my retirement years. I fully understand that just adjusting down and using a figure of 0.8X, or whatever, would get you close to the same numbers, but in the former scenario the 0.2X is still growing and putting off income, so the amount you should be able to safely withdraw would be greater than what the latter would show. Hope that makes sense.

Not what you are asking for specifically, but this is useful.

https://www.firecalc.com/

Gracias

As Stonksock said, the original study was not to preserve capital, but rather to not run out of money. In some cases that meant capital was preserved, in others it grew, and it some cases they barely made jt. Since the base assumption is that you are taking out the same value (adjusted for inflation) yearly it does not account for Sequence of Returns Risk which will have a huge impact on your retirement account. If the market drops 25% in your first year of retirement and takes 5 years to recover and you don't adjust your withdrawal, there's a good chance you may run out of money.

You can be more aggressive and pull out 6% or less aggressive and pull out 3% but those are just assumptions just like the 4% rule.

The firecalc link is a great tool to visualize these scenarios.

I ran 3 scenarios without adjusting any of the base assumptions in the program.

spending as $60k (4%), Portfolio as $1.5M and 30 years. In the 124 scenarios it only failed 6 times for a 95% success rate. The lowest balance was NEGATIVE ($600k) and the average balance was $2.8M.

spending as $90k (6%), Portfolio as $1.5M and 30 years. In the 124 scenarios it failed 57 times for a 54% success rate, which means just over 50% of the scenarios did not run out of money. The lowest balance was NEGATIVE ($5M) and the average balance was $398k.

Running the scenario @ 3.5% was 100% successful.

Keep in mind this program is looking at the historical returns of 124 different 30 year periods within the stock market. We don't know that the market will behave in the same way going forward.

South Platte said:

---

Don't all of these percentages assume you have a nice chunk of retirement? At least $1.5M? 4% of that would be $60,000, or $5,000/month.

---

The point is to plan your retirement around your assumed spending. If you follow the 4% rule, you multiply your planned spending by 25 to get your savings amount you would need. As you pointed out, if you want to withdraw $60k x 25 = $1.5M.

This is assuming you don't have other income streams. If you do then you can subtract that from your yearly need.

Is Dave still shilling his mutual funds and 10% withdrawal rate