Well stated. I like Dave Ramsey, and I think he is a FANTASTIC starting point for people that lack financial literacy, and specifically want to begin a debt-free journey. But once that goal is achieved, it's time to look elsewhere for investment and retirement guidance.

The problem is Dave acts like he's a retirement expert too and doesn't recommend that people should talk to a fee only financial advisor about what a good safe withdrawal rate is for everyone's specific situation.

Very well stated! I couldn't agree more!

I never thought about it but you're 100% correct. Of course if you've mastered step 1 then steps #2 and #3 become *much* easier.

And Dave does tell people to get advice. The thing about getting advice from Dave versus some guy with a shingle out, Dave is willing to talk about HIS journey.

Haha, totally agree. But I have to say Dave has grown on me a little.

Dave's a bit like Winston Wolf in Pulp Fiction, here's my advice, pretty please, with sugar on top...

Ramsey is good, but I think Erin is a little better in bringing in the sweet spot for most people. She also seems to factor in different circumstances, such as age and portfolio aggressiveness into the equation. Probably for most, between 5.5 and 6.5% is a little closer to the sweet spot. Savers tend to be overly conservative, which is really not good either. You have to take some chances in life. And if your odds are above 85% success rate, take that chance.

There will always be RMDs. Why does everyone act like they are some major roadblock in their retirement plan? If my investments do so well that I have to take out more than planned when I am 73, that is a good thing because my investments did better than I planned. Of course careful monitoring of my gains could allow me to take out more during the go years so I dont have to take out more than planned when I hit the RMD years.

💯

Even 75% might be too low at 95

When my dad was in his 80s, he moved from his home to an assisted living place. His studio apartment, in NJ, before he transitioned to a nursing home, ran over $90K per year. Once he moved to a nursing home, the expense was over $10K per month, and this was over 7 years ago. As we age, particularly for those who may need some form of physical assistance, it can become quite costly.

@@stevemaggs6781 This is a totally different video that I hope Erin does someday. I'm 65 and have been putting money away earmarked for many things, Car fund, vacation fund, college fund for my kids and their kids, and I started an assisted living fund two years ago. mainly from moving funds around. There are plans you can buy into for this ( but I have done zero research into them) but at 65 I feel like I can stay in my house for the rest of my days. These days it's a trust thing like people selling timeshares, you don't want to go into something that when you go to use it you find out it's horrible. I would rather have plenty set aside and let my kids put me in the best one they find that fits my savings and is close to them.

Agreed. I'll bet the difference between even age 65 vs 70 for retirement could be the difference between 5% and 8%.

And I think that is where Dave is coming from. Dave famously doesn't have much of his portfolio in stocks and bonds, and is mostly in debt free rental properties and businesses. Compared to his literal money put into those properties, he likely is making 10%+ of yearly return, so 8% withdraw, when you aren't actually liquidating the underlying asset, may be where he gets his weird number from... But it certainly isn't a safe withdraw rate for stocks, and I don't think he will ever explain how he got to his 8% number because the dude clearly doesn't know how to do finances. Sales people are really good about generating income... They aren't people you want drawing up a fiscally responsible budget. And Dave didn't get rich by being smart, or fiscally responsible... He would probably be more wealthy is he could do math and was fiscally responsible lol. Dave is a sales guy, so go to him if you want to lean how to do sales. Going to a book and course sales man to learn how to do finances is crazy.

True but, following Dave's plan of "baby steps" has helped me grow my portfolio from $0 in 2005 to over $3.5 million today. Hey the mind set and do whatever is necessary. We all follow our own unique paths, in life ... 🤔🤔🤔

Dividends are usually not the correct concept unless you have very specific taxation requirements. Lots of the best companies do not even issue dividends.

You're right about healthcare. Living abroad means you don't have to accept prevailing conditions in the US as the norm. It's depressing to think that if you're looking for affordable medical care, you'd be better off almost anywhere else.

Quality of care and timeliness of it is the question. US is not all bad, it leads here actually.

@@fractalelf7760 Actually, that is incorrect.

3.5% is ultra-safe and OK if you worry about running out of cash.

Wow, thanks!

Thank you! 🙏

Five years? Sounds as if you're pretty rich.

Thanks so much!

Hi 👋

Very true! I mean, even the are based off these charts say a 7% withdraw safe, if you’re not adjusting up for inflation. So his recommendation is pretty darn close!

When planning for retirement, are we not supposed to prepare for the worst? Also that isn't adjusted for inflation, at the end of 25 years those withdrawals are only going to be 64% of what they used to be, assuming 2% annual inflation. Table 2 at 6:34 paints a much more realistic picture, showing that 8% withdrawal is a coin flip in terms of success.

@@thursdaythought7201 Actually, I don't. The "worst" is impossible to prepare for. To me, the problem with over-conservative estimates is that it makes your investments artificially inadequate. For example, if you need $40k / year, at 4% withdrawal rate you need $1M. If you assume 3%, you need $1.5M. etc.

Yes! Thank you!

Why are still backing Dave Ramsey he’s flat wrong call him out for somebody that promotes money management and leadership qualities then on live radio throws his own employee under the bus is this quality you want in your CEO all you are being lead by the nose by wolf in sheep’s clothing

Thanks for sharing!

Glad you enjoyed it!

That makes me so happy to hear!!

Woo. Thinking I'll do 75 stocks, 20 bonds, 5 cash

is use the rhomboidal geometric spending rule

Accurate!

Not scaring the kids seems right. Dave tries to incorporate psychology that seems to work for a type. One is that he recommends paying the smallest bills first regardless of the cost. Say you have a car loan at 12% with $20k to go and a credit card at 22% with $30k and and scavenged an extra $400 a month. I'd expect he'd say pay the car off first, feeling they would have a greater sense of accomplishment by knocking a bill out quickly.

He also doesn’t like people retiring before absolutely necessary, so his numbers are for people well into retirement age, not those retiring “early”.

Thanks!!

I actually discussed this in the video I have going live on Monday. Originally it was planned to be today’s video, but then, based on what was the financial conversation on the Internet, I filmed this video and published it today instead 😊

www.financialplanningassociation.org/article/journal/APR11-portfolio-success-rates-where-draw-line I've also added the link to the video description 😊

Good point, but another strategy for a couple is to ensure one high SS Check for the survivor. In today’s dollars that would be $3-4k per month. Our survivor check will be $4500, and we have a small longevity annuity. So we are planning on spending our portfolio over 20 years with a 5-7% WDR. Owning your primary residence also helps. Both our mom’s are 87 and “survive” on about $2300/mo with no portfolios. An extra $1000 and they would be ecstatic.

Why not delay S.S. to 70 to get a larger slice of "guaranteed" income if your health and family genetics are good?

For those of us who are younger, SS doesn't seem like much of a guarantee.

Nice!

www.financialplanningassociation.org/article/journal/APR11-portfolio-success-rates-where-draw-line link has also been added to the video description 😊

I was wondering the same thing. Does the average account for all the people who die while they are still working and therefore have 0yrs of retirement.

Yeah, I still don’t understand that math.

​@@michaellong2791The math is done by dividing the $50,000 by the portfolio size. So 50,000 / 1,250,000 is 4%, and 50,000 / 555,555 is 9%. It's just the size of the annual withdrawal in relation to the portfolio. But obviously, the higher withdrawal rate depletes the smaller 7:08 portfolio much faster (ignoring inflation and capital appreciation for simplicity).

Send me an email, erintalksmoney@ gmail.com 😊

A portfolio is deemed successful if it doesn’t run out of money during the time horizon and if you are able to make your withdrawal. It doesn’t consider leaving any kind of legacy

@@ErinTalksMoney thank you!

@erintalksmoney Scammer here above trying to pretend to be your account, just fyi

s&p yield is 1.64% so to get $40000 instead of 1 million you'd need more than 2.4 million.

If you rely on dividends then you will miss out on growth stocks. When a company issues a dividend then its value declines by an amount equal to the dividends. So (excluding tax issues) there is no functional difference between selling shares and taking dividends. Many large US companies do not issues dividends because share buy-backs are more tax efficient.

@@kxjx If you are retired, you are more interested in income and preserving the value of what you already have. Dividend stocks are a compromise between growth and income that has a good chance of accomplishing both goals.

@@rhaacke mathematically you are incorrect. The price discovery mechanism of the market equalises the price of dividend and non dividend stocks. So (on average) taking a dividend and selling an equivalent stake of a non dividend stock are exactly the same. The *only* time it makes any difference is if you are in location where dividends and capital gains are treated differently for tax. If you are thinking you need to buy dividend stocks for any reason other than tax planning you are almost certainly wrong and going to end up costing yourself significant lost wealth.

I love employing a bucket strategy

I think it depends on your risk tolerance

Don't buy only 20 stocks. Buy 1000s. In anycase you should be re-balancing to keep your asset allocation correct. So you can sell in accordance with asset allocation target.

Read your message, thanks for watching. I’ll work on a video. 😊

@@ErinTalksMoney Thank you for such a quick response. Your videos are very insightful and helpful for those of us out here managing our investments.

How large of a cash reserve would you need? I’m thinking 300k

@@dantheman6607 I’ve been thinking 250-300k too. I’m undecided to wait until late to quickly save this amount, or slowly over 8 years. 8 years is probably safer because you never know what the future brings. You?

@@HoustonTom Definitely will have a cash buffer to offset down years in the market. I’m 55 so cant think of SS yet, I’ll have a modest pension too so that will help. I’m thinking I’ll need at least a 200k cash reserve/emergency fund. 2022 showed us the importance of having a back up reserve outside the markets.

​@@dantheman6607Since retirement in 2017, I've maintained a years expenses in no risk investments. That would weather me through the worst parts of most bear markets. There's also the downside that all that money is sitting around doing nothing for you. Although recently you can earn ~6% on that money.

@@dantheman6607My plan is 5 years of living expenses, which should get me thru any modern market downturn. In exchange first that, I plan to keep a high percentage invested in securities so my money will continue to compound about as much as it does now.

kzfaq.info/get/bejne/fs6Xacdzl7vHcac.html That fear is reasonable, Dave's great at helping people eliminate debt and start saving their nest egg, but his quoted rates of investment return and sustainable withdrawal rate are misleading, imo. Yes, historical actual rates of return are factual, but what folks actually GOT is always lower, cause they do stupid things along the way (sell low and buy high). So you're not getting the return he's planned for you AND you're not making it to the end of your life with all your money by blowing 8% evey year (see above link by math nerd who actually makes a living in finance, vs what Dave does, essentially entertainment/education). Oh, btw, I always question why people think taking MORE money out in good years is sustainable. Do you take less money out in bad years to balance that? If not, then haven't you lessened your sustainability?

Because stocks also tend to go down faster/farther when the market goes down

Dave is looking at market returns as LINEAR - they. are. not!!!

The problem is what happens if you retire and that first year there is a 20% negative downturn followed by another year of 5% downturn. You would need a different plan for this event. The problem is the market doesn't stick to roughly 7-10% returns every year, it is split into 40% one year, -10% the next.

Yeah, if you are investing in things that are legal 12% is a crazy number to use in calculations.

@@Iffy50 12% rules out bonds and index funds, on average. My 5 yr average on my IRA is just over 10% return (funds and stocks) and my brokerage account (all stocks) is not quite 17%. My 401K, a bond heavy target date fund, performed pooly for years then took a bath 2022---that sure wont cut it! Maintaining an average of 12% means cultivating good stocks and have a plan when the mind goes.

​@@Iffy50it isn't necessarily that crazy. Far be it from me to defend Dave as I think he is a modern Christian scam artist who sells bad advice for a high price while hiding behind supposed values. But there are a lot of legal stable investments that can offer a 10%+ yield that people seem to ignore. BDCs, RIETs, and closed end funds are all required to pay a percentage of profits to shareholders, and the share holders pay taxes on those profits instead of the business. So if you own those inside of a Roth or something then you can pretty easily earn a 10%+ dividend with minimal risk to asset depreciation or tax concerns... But also not likely to have asset growth either. But if the goal is income instead of growth it is a good way to go. A lot of rental properties and small businesses can yield 10%+ per year on cost with relatively low risk. The initial setup can be a growing pain and learning curve, but after a few years a steady 10% return would be a low expectation. There are stock funds that provide options, or which trade volitility. Similar to BDCs, their value tends flat to slightly down over time and you loose tax advantages, but they can often pay a consistent 15%+. So again, if cash flow is the goal, it isn't a bad way to go. A lot of dividend investors calculate dividend on cost, and it is crazy to see how even 2% dividends can yield 20% on cost after a decade or two of dividend increases. The real time dividend may still be a mere 2% on cost, but over time you get asset appreciation, and dividend growth that seems impossible until you run the numbers. It isn't going to be 10%+ on cost overnight, but over time the rate of return can be rediculous for what looks like a 2% dividend on paper. Dividend investing is awesome, and I don't understand why people down play it so hard when it offers such great results and significantly less volitility compared to traditional growth stocks. But for general stocks and bonds... No way a 12% average return is considered normal, or where an 8% withdraw is reasonable. That is crazy talk, and dangerous for Dave to suggest doing without a lot of context!

My 401k runs well over 12% most of the time but, have to be cautious about years like the 80s.

sequence of return risk is not being considered in daves 8% advice - its horribly irresponsible to ignore or worse be ignorant of this market risk - AVERAGE returns dont mean shit if you retire into a lost decade - you wil be financially ruined - period.

If you’re using an 8% rate of withdrawal, you would need a smaller portfolio to meet your income needs then if you were using a 4% rate of withdrawal

@@ErinTalksMoney ok, thank you my friend. sometimes i am not the brightest crayon in the box and need a bit of help. Keep up the good work on the videos and congrats on the growing family. As for my family...we are ready to get out of Michigan once again. The winters here (as you know) are not fun. hahaha.

Oh my goodness….i never realized how good life could be without winter until I left Michigan! I love Michigan… in the summer. 😂

RMDs and withdrawal rates are not related. You can invest the RMD in a taxable account.

I read that assuming your have a comfortable Traditional IRA / 401k, the RMD is "replacing" the 4% and actually you have no choice. BUT the RMD's amount doesn't mean you are limited to it, you can withdraw more.

There are TONS of videos on Roth conversions. Also, if you are doing well, Qualified Charitable Distributions (QCD'S) are an option. You don't pay tax on QCD's and they count toward your RMD.

@@dominiquemartin9524 Yes, you can always withdraw more. I was speaking of wanting to limit the amount to 4% or below always. There is quite the discussion that 2.7% withdrawal rate may be the "new" ideal. I'm not sure I buy into that, but it would be nice to think I would not need to withdraw 8%, higher, later in life if I don't need to. (look at RMD tables for people in their 80s and 90s).

The problem with using average growth rates is sequence of return risk. If the early years of retirement have very low or negative returns, too high of a withdrawal rate will mean you run out of money. Even though the 30-year average return may still be 10-11%, you won't have enough money left for the later, higher returns to rescue you. There are many YT videos on sequence of return risk, and Erin may have already created one.