If a 4% withdrawal rate on $1,000,000 causes you to lose hope, give up on a plan, and do nothing, then that is not a money problem or a math problem. There is a deeper issue going on; it’s a “you” problem.
40k a year with a paid off house is not a problem. I don't know how it could be. I live on 30k easily. I don't have a kid yet, so it would be virtually the same by the time I retire.
In this episode, George Kamel tries to keep his job while keeping a straight face and agreeing with the idiotic advice his boss promotes. We all heard what Dave said, George. He called you a moron and an idiot. George needs to talk to his coworker Ken Coleman about working in a toxic environment where the boss berates you publicly. I don't know how much Dave pays George, but apparently, it is enough to swallow your pride and agree with something that you think is wrong. Saturday Night Live couldn't have come up with a better skit.
He said he & his wife combined were worth 1 million when he was 32. He started working for Dave at 25, and his wife was better off financially than he when they met, and he also said he invested consistently. If this is the case, a salary of $120,000 could've gotten him to 1 million if he way investing the entire way, $840k if he never invested. That's also assuming his wife doesn't have a job. He probably makes around $100k. I don't think this is enough for a college graduate who is very well spoken to deal with his boss talking about him this way live on air.
He just wrote a book; his book deal royalties probably pays him more than $100K a year alone given how many followers he has on his TH-cam channel. The accountant with 5 years experience at Corporate makes more than $100K alone on salary not counting bonuses. George is not being a weakling and a slave to his boss for $100K. He is a regular host on the show and Dave probably drops some serious change on George. @@rossmanngroup
Seems about right for someone lacking liquidity of FU money as it is all vested. Clearly wants to keep his job. I like George well enough. I like him when he is honest more. But everyone knows Dave likes his system over maths. Some of it is behavioural and useful, but the 8% withdrawl rate relies entirely on the invested capital making enough to cover it every year.
@@KayFabe87not true… we can go work anywhere else.. where else will George go? Everything he does is owned and funded by Ramsey. And he no doubt has a no compete agreement so he can’t go start his own channel right after leaving. George’s whole career has been in Ramsey… I doubt he had enough negotiating power to have ANY type of leverage during his contract negotiations.
@@genxx2724 yeah george is such a slave... with that slavedriver boss who lets him(george) host his(dave)show and help people (including george) get out of debt 😂🤡
The whole thing is a joke. Everybody knows that 8% isn’t sustainable unless the market consistently goes up year after year which we know it doesn’t. Everybody but Dave Ramsey apparently. Obviously Kamel has to stay in line to keep his job.
I feel sorry for these people. The more they squirm and try to move the goal posts, the worse they look. At least Dave claims to be filthy rich and can therefor afford to ignore his own stupidity. Not sure how well these other clowns will fair though, wowow.
@@Rick-the-SwiftYou don’t know anything about these people. There’s no need to feel sorry for them because they’re all doing very well. You’re clueless
@@chrisl6238 Ok, well, I hope you feel better now. I still feel sorry for people who let arrogance, fear and ego get in the way of honesty. I don't care how much money they make. That's not all that life is about.
This situation is a microcosm of what every person who works for someone else goes through, including George. Your thoughts are not your own. Your time is not your own. You have to conform to what the job requires of you. You can't fully be yourself. Your true beliefs must be held inside, while the company's beliefs are what comes out of your mouth. Now, is it the worst thing in the world? Nope, it's just part of the game. George will be just fine, but I'm sure he's got a nasty little taste in his mouth from this whole experience.
@@alanwong8307This is exactly what George Kamel’s original video stated. Especially the younger you are when you retire. If your home is paid off and you are debt free, it should theoretically be very easy to live off of $75k a year, with the occasional extra withdrawal if you need it. I think I will be at around $2.5mil by the time I retire, and believe I could easily live off of ~2.95% of that, which would he ~$73,500. My wife will eventually also have a decent sized nest egg. Even if the government robs us and doesn’t give us our social security, that should be enough to live comfortable on between age 65 and 95, and still likely have 85-90% of my original balance.
The thing is this: the majority of DR's listener base are those in debt trying to get out. They aren't good at math or wouldn't follow it even if they knew it. If they were good at math and followed it, they wouldn't be in debt to begin with. Personal finance is 80% emotional regulation. So his "in" with them is to appeal to their emotional side. Feel-good elements like hope sell. Most people, myself included, stop listening to DR once they get out of debt. People like me initially thought 12% returns were consistently possible. Once I got out of debt and started investing, I quickly learned that isn't happening.
Yep. If the Ramsey koolaid drinkers were good at math, they would realize paying off a 2% car loan while pushing 29% credit card debt to the back of the stack doesn't make sense.....
It’s disgusting how George trying to shame people who are trying to tell the truth as nerds, when he really knows the truth 😡. Intellectually dishonest.
Moral of the story do not trust Ramsey or George about anything. George is just trying to save his job but because of that we cannot trust him any longer.
I couldn't finish watching your video. I feel so bad for George. I heard his 4% recommendation, and then I heard Dave lose it. The poor guy had to choose his job over his integrity.
Is it just a misunderstanding of the timeline? George was referring to FIRE movement retirement where you're going to need a lot longer runway than you will if you retire at typical retirement age of 60-70 yrs old. The earlier you try to retire the more careful you will need to be with withdrawing money.
@@DavidMcKnightYeah, but he didn’t take the video down… so… maybe he’s just being safe to not say anything bad about the boss, but still stands by the 3% for early retirees?
@@DavidMcKnight He does specifically advocate against FIRE. But, he laid out a logical reasoning for why 4% is too high for someone who needs to live more than 30 years off of it.
@@davidmcknight8201 And, yeah, he is definitely towing party line, but also not taking down the video. On the backend, they probably discussed it and he likely got Dave to understand his video was anti-FIRE, and the 3% only applied to people trying to live for 50+ years off of their “magic walkaway number”
"...I think, realistically, people adjust lifestyle depending on market conditions..." Then it's not an "8%" withdrawl rate, is it? Lol This dude compromised his beliefs and irrationally cast aside facts for fear of losing his job. Zero integrity.
Dave Ramsey's area of expertise is in helping people get out of debt and he has helped many people do that. However, he is not equally as adept at dispensing investment advice. Nothing wrong with that, but he could be a bit more open about acknowledging that investing and withdrawal rates are not his forte and that the math does not support a long term 8% withdrawal rate. Tom Brady was a great QB, but probably not the best RB, TE or kicker; hence he focused on his area of expertise and deferred to his teammates in their respective areas of expertise. It doesn't make him any less of a great football player just because he couldn't play every position with equal adeptness. Dave got a little over his skis with this advice.
Dave Ramsey follower here as far as the principles (baby steps). Definitely agree with some of the stuff you are saying. And I can't stand the way Dave responded to this caller or George. Honest question or comment is about the quote about 100% stock portfolio - is that referring to the fact that Dave only recommends mutual funds vs bonds, annuities, single stocks, etc?
Dave is an all stock mutual fund guy, as you know. You can get mutual funds with a mix of stocks and bonds. You can get mutual funds with all bonds. Dave sees bonds as a debt instrument (because they are). Thus, he rejects them on principle. He says as much in his books. Bonds are typically inversely conflated to the volatility of stocks - typically and not perfectly. Since this all blew up, I have been reflecting on this. I think to deny bonds, you must deny sequence of returns risk. The argument for bonds is sound on that principle. Dave has denounced asset allocation theory in the past, but asset allocation theory is designed to reduce sequence risk when in the distribution phase. QED: Dave must ignore sequence of returns risk in order to always deny bonds mathematically for principled consistency. There is an internal contradiction in the plan, and Dave is unwilling to consider any bond or bond alternative.
I remember in middle school when we started learning about interest/percentages. After spending a little bit of time playing around with numbers and doing some basic word problems, most children in this age range can understand that when you're talking about the time it takes something to appreciate or depreciate by a certain proportion of the principal, the amount principal is irrelevant - what matters is the percentage changes during each time period. It's incredible that Dave does not seem understand this, and that George clearly understands but has to deny reality to stay in his boss's good graces.
Seems like pre Covid Dave’s plan was solid and almost bulletproof but with this new inflation/increase of standard of living it’s almost impossible to follow unless you live poor until you retire. If you live by his 10+% down and 15 year fixed rate mortgage for a house you’ll be working 80 hours a week for years in some markets just to meet those guidelines
Money hasn’t changed that drastically at all in 3 ish years. Dave is great at repackaging old advice to be easily understood and get people out of debt. He’s NOT a financial advisor. He doesn’t understand that money in the market can be down for in some years, and that retirees drawing on their accounts can’t afford to be at risk of the whims of the downturn-> upturn ->downturn cycles.
Dave Ramsey sells real estate, planned advice for getting out of debt, and hope. That is his Wizard of Oz pitch. He cannot have his company (or anyone in it) bucking his system (biting the hand that feeds him, and by extension them). If people who are 600K in debt realized they're not 600K away from financial freedom, but really like 3.6 million away from their goal, they would never take any steps to get out of debt. That is what he said on the podcast (people in debt lose hope). George reiterated that here at the end (people aren't saving). The truth is, the point in which they learn they're not ever going to a 12% ROI in stocks, they don't need him anymore anyway. And so he knows his market is not fixed; its dynamic. Dave is hunting the next person in debt, not the last one who now has money. The guy who called in doesn't need Ramsey anymore. Ramsey is no fool. And George realized in a clash of egos, he's not in a position to take him on. Thats my take.
That's a good analysis of Dave's target audience. Also I think that George has little choice. He has to cave to his overbearing boss or start looking elsewhere. It's a tough spot he's in. I'm sure that it's been a good learning experience for him. Maybe he will grow a pair eventually to contradict Dave or just move on to be free to give more accurate advice. Or just sweep it under the rug and move on with his high six figure salary and keep enjoying his Dave Ramsey personality status.
@@ryankiel4895 ---good points! It's hard to ask George to give up being a personality on the show (even if Dave is overbearing) because it makes him a household name and I'm sure he's well compensated. A good soldier backs their general even if the plan is bad, once the plan is public!
@@ryankiel4895 he is popular enough now to do his own thing without being on the leash of Dave Ramsey. But instead he decided to remain on Dave Ramsey's leash.
George made an interesting statement. 3:12 . He said if the stock market returns 10% (instead of 12%) then you can draw 6%. This fails when the stock is down 14%. You would need to withdrawl -18%. In other words, you would have to add money back into your portfolio. So, totally unrealistic and idiotic.
Dave Ramsey helped me over 25 years to get my finances in order, but I did not like how he called people stupid in the videos. There is nothing wrong with having a credit card if you can pay it off when your statement comes in. Things have changed over these 25 years and looks like his course is still the same. You have to change with the time and I do believe if Rachel takes it over, it will start changing. I have been wanting to do a financial ministry, but as of this time, I can't go with "Financial Peace".
The stock market has had (3) 10 year stretches during the last 100 years where the market showed a loss, 1930-1940, 1965-1975 & 2000-2010. If a retiree lived through just one of those periods while withdrawing 8% a year, he or she would be looking for a job.
Your comment is why I'm not sold on the following talking point for stocks-only investing: "oh, well, if the stock market had long years of decline, then you would have much worse things to worry about than retirement savings! at that point, you need ammo, food, and water bottles! not stocks or bonds!" We didn't have an apocalypse in any of those periods you mentioned, yet still had long periods of market decline.
George works for Ramsey so he has to agree with Dave. But i agree with he’s real belief. If you retire early 30-40 year old. A 3% is a safe approach to not running out of money.
George looked way uncomfortable. You could tell what he was saying wasn’t jiving with his body language. If you have a giant nest egg then why would you need the 8%. It’s only when you barely have enough to retire on that you’re going to need the push the limits. Even his words were trying to tell the truth but he knew he couldn’t say, “Dave’s wrong! He’s a little bitch and is making me say these ridiculous things or I’m fired.”
@@richardlee5536he might have a contract that makes doing so difficult for the time being. Perhaps a strict no-compete or perhaps he is waiting for a large bonus to mature at the end of the current contract term, in which case he bites his tongue a bit longer.. I wouldn't be surprised if George eventually cuts ties with DR and turns against DR's message.
my understanding of Ramsey's point it you can pull average return (let's assume it's 10%) minus inflation 4pp (minus 1pp to stay conservative) = 5%. Now that's in the first year, but each year you would extract 5% of the balance you have, not of the 1st year balance. So for that sequence of risk return, with a few bad years at the start of retirement, if after one year you extracted 5% and market dropped by 30% then the next year you would extract 5% of the remaining balance only. Aka, if you had 1 mil and you extract 50k. Next year, you had 700k only (due to market correction) then you only extract ~35k (5% of 700k). I know that makes it less predictable, but the predictable part is SocialSecurity and I'm assuming most Dave Ramsey followers after 30 yrs of gazelle debt payoff+ frugality and budgeting, should be frugal enough to give more than consume to sustain their lifestyle..
Just like his daddy trump, Ramsey is surrounded by yesmen an insulated from any fair criticism. Listened to the original caller's interview on this channel and now learning that the producers called his question "malicious" is wild. Tells you everything you need to know about the ramsey world.
George’s episode was talking about FIRE and retiring at 35. He did take it out of context and you knew that but failed to mention that for drama and clicks. Slimey and gross on your part man.
Your incorrect. It’s a 4% rule no matter what age you retire . Look up negative sequence of return risk . Also there are periods of time where the market does nothing for a decade
Whenever D.R is asked a question on the lumpsum vs the annuity payout option he will cite his 8% withdrawal rate and always 100% of the time go with the lump sum option without asking anything about the callers personal financial situation . Daves PR people are working overtime on this one.
If someone is sitting on cash of about 3 years of expenses, they can aggressively withdrawal from their retirement. In down years, they can spend their cash instead.Then in good years, replenish the cash and withdrawal for expenses. But it’s tough for most to save 3 years of cash.
You arent taking into account how Ramsey can pick the exact mutual fund every single time with zero mistakes and make 15% plus every year. And even though the same fun will never continuously beat the market Ramsey knows how to pick the exact right one every single time, 15% interest forever with zero mistakes. You can easily take 8%, dave has a special power you need to understand that
The issue with a n% withdrawal rate set at retirement date is that it doesn’t adjust to what has actually happened, good or bad. So you can have a 60yo and an 89yo with exactly the same equity, and the 4% rule would be telling the 60yo they can withdraw more than the 89yo, because the latter’s 4% + inflation is based on whatever their equity was worth 29 years ago.
I wanted to let this one slide, but it fell naturally into the topic I have planned for this upcoming Tuesday. You can expect an emotional response from me next week. Thank you for covering the technical truths behind the inconsistent arguments made in this interview.
You were malicious? I used to be a hard core Dave follower. As I learned more and more about investing (walking through baby steps 4-6) I started to realize there was a lot to be desired from Dave’s investment advice. Dave has become a “get off my lawn” man and is also a bully. If you challenge anything he says he’s going to belittle you and gaslight you. He can’t allow independent thinkers because you wouldn’t need him anymore. His arrogance and God complex needs to be checked. I can’t believe that someone who has done so much for the Ramsey brand (you becoming a Ramsey financial coach) would be talked about like that. Shows me that they don’t give 2 craps about their customers.
@@gthree0239 Perhaps we are both recovering Ramsey followers now. It makes me sad to say this is the second time George has said such about me and my intentions publicly. I ignored the first time around other than to ask for mutual forgiveness for unintended ills directly. This time was much more public, and an answer can be merited. Believe it or not, I even paid for the RPC program for a few months. I coordinated with members of Dave's staff in an effort to improve his budgeting app with my own ideas. I have hosted FPU at my church. I own so many books... I don't know if I could have been a more avid follower leading up to this. I doubt they know all that though. Had I not been that invested in Dave's work, I probably wouldn't have felt compelled to speak up about this at all.
I don't think the total nest egg is the argument on whether its 4% or 8% in order to not run out. If you are taking out 8%, you are at least double if not 2/3 more likely to run out than you would at 4% considering both inflation and other factors. You could have $1m or $2m, but the rate of taking out of either 4 or 8 % still affects the money. If people are living 30, 40, 50 years after retiring, then even at $10m, you're going to run out if you are drawing it down, unless you are going to take less in each future year.
Right. Not to mention most people will need to spend more and more every year to be cared for as they grow old. Insurance stops covering you as those medical expenses go up, etc.
I’m curious if newer investment options would bump the SWR higher. I own a good stack in JEPI and JEPQ. It seems they help mitigate sequence of events risk. I have yet to sell a share in retirement. In fact I keep adding.
My favorite is your mortgage must be a 15 year with the total monthly payout no more than 25 percent of your monthly take home income. There are many parts of this country where that just dosen't work, especially when you consider the taxes.
Ramsey was yelling and making fun of callers back in spring 2021 who called asking about possible inflation..... he would laugh at them, teasing that he knew they'd fallen down conspiracy theory youtube holes...... see how well that has aged.
The whole thing is a big joke. The FA who are now preaching this 4% rule, don't seems to also explain what that means. Most people will barely having 1M in retirement which means you be pulling around 40k a year, that's huge drop from someone making 6 figures lets say. Which means you better plan to save closer to 2.5M or 3M to follow that 4% rule to keep a 100k yearly income, however that means doubling or tripling your retirement contributions probably closer to 20% of your income. This is where people lose hope when you look at the numbers can you can't come close to what you need. So 4% is a harden rule to follow in withdraws, but your retirement contributions don't worry it's just want you can put in.
Wow! You should be an investigative reporter! Great work! Poor George got beat up by Dave and now has to cover for the incident because no doubt he has an NDA with Dave, and could never say anything remotely disparaging about Dave. You can tell in George's responses to Graham and Jack, that he's showing restraint as to not violate his NDA.
He did still give advice that disagrees with Dave. $2mil at 8% as opposed to $1mil at 4%. But we also have to remember George's original advice was for people doing FIRE at 30. George is smart. He seems to know how to handle the situation he's in.
This is 100% math. It doesn't matter how much you have, it's how much you can grow your money on average over time. If you are actively managing your portfolio in such a way that you are reliably growing your portfolio at 12% every year, on average and without fail, then yeah, take 8% every year. But if your portfolio cannot maintain an average growth that performs as well or better than your withdrawal rate plus inflation then, at worst, you run out of money in 10 years (assuming 0% growth and not negative growth, also adjusting for inflation at 4%). At 10% growth, you run out of money in 20 years.
This is an amazing video. I'm tired of people saying how many people Dave Ramsey has helped. With something as drastic as an 8% withdrawal rate, all that saving and snowballing will be a waste and you will be in a worse situation. It's like saying, "Ive helped million build a house of cards, and then tell them you can safely pull cards from the bottom, when you need them without risking the tower from falling down"
@myrtle471 I agree. I love how he helps people get out of debt. But his Sequence of Return theory is going to cause a generation to fail. And he will be passed on by the time they do it. He has multiple streams of income. Books, podcast, TV, youtube, seminars, training programs, affiliate programs. I'm sure he is fine pulling 10% from his investments and living on the edge. There is no problem with the math when you are contributing...the problem comes when you retire and no more income or very little is coming in.
The real issue: Dave Ramsey Uses simple math in some situations and complex math in others, all to align with his "rules". He will say you should pay off the 4% mortgage early even though according to him you're guaranteed 12% in "good mutual funds", because a simple equation does not account for risk. He's right. But why doesn't he account for risk when assuming you can withdraw 8% from a nest egg? Has he never heard of "sequence of returns risk"? Why can use he use 12-8=4 in retirement accounting but not 12-4=8 as a reason to not pay off the mortgage early? He lacks consistency and its obvious.
The issue isn't 4% or 8%, the question that must be asked first is at what rate is your nest egg growing? Dave's 12% is super aggressive for folks who have a small nest egg. People with small nest eggs probably want to be positioned at a much more stable 5-6% expected rate of return, because they can't afford to see negative returns over a year or two to experience massive gains by year three or four, especially if they're expecting to drawdown those investments to live. Drawdowns in negative years can be catastrophic to a nest egg. My boys 529 plans earn about 5-6%, and they have seen very little to no market volatility over the years.
I don't know anything about this stuff and this issue how I first became aware of the concept "Safe Withdrawal Rate". So the thing I'm thinking about is this - I watched a 401 lose 19% in one year (2022). Seems to me, if you've already retired and your account experiences THAT, then you're in a bad place whether you were at 8%, 4%, or 1%. I have another 20 years... so it's more of a minor speed bump. I'd guess the closer you get to retiring, the more you're interested in preservation of principal and your investments would reflect that. I think Ramsey's response to this notion of a more conservative 4% is disproportionate and I have no idea why he would go off so hard about it.
Correct me if I’m wrong, but if you have 1M in retirement, and you have a annual return that year for 10%, can’t you withdrawal that 10% gain and not touch the initial 1M….????
Sure, you can do it that one year, but you're not going to have that experience every year. The question is, how much can you take out on a sustainable basis, regardless of what the stock market does year in and year out? And 10% annual withdrawals will bankrupt you within about 15 years in most cases.
The problem is you likely have minimum withdrawals required to live on. Say you need $50,000 a year to live and $1 million in your 401k. Year 1 stock market increases 10% and you withdraw $100,000 to take advantage of the returns. Still $1 million in your 401k Year 2 stock market drops 20%. You drop to minimum withdrawal living requirements of $50,000. 401k value $750k Year 3 stock market drops 10%, you withdraw minimum $50,000. 401k value down to $625k. So in 3 years you went from $1 million in your 401k down to $625k. The odds this portfolio will give you the $50,000 a year in minimum income you require is very low, especially eleven you adjust for inflation. Safer to cap your withdrawals at 4% and ensure you have a stable retirement
You HAVE to put the original caller's age into context, as well as the age of people Dave suggests can take 8%; they are different. Someone retiring at 40 shouldn't take 8%. Someone retiring at 70 probably should consider it. That's what the whole kerfluffel was about, really.
You can hear it in his delivery that he doesn’t personally back that 8%. I heard Dave’s rant and found it unfortunate that he couldn’t be flexible enough to appreciate the more conservative (and clearly safer) 4% rate of withdrawal. We understand George that you have to tell the company line
my guess is that whatever percentage of a retirement fund gets taken out would depend upon the life style of the person. And the amount within a retirement fund also depends on the persons life style.
He put daves conditions around the 8%...yea if your house is paid off, money in bank, $2m in retirement account, etc etc... everyones financial situation is different...Id rather err on the conservative side...
At 65, you have less than a 10% chance of 11:10 living to 95. The odds of living past 75 are hardly certain. There is a reason insurance companies are comfortable modeling 6.5% immediate annuities at 65.
I’m a modest guy I don’t know much. But it seems to me if you wanna be conservative and take out only as much money as you need to be safe you should be encouraged to do that
LOVING YOUR FORENSIC BREAKDOWN DAVID WOW!!! George would have been better sticking to his opinion, getting fired and creating the Kamel Solutions company. He'd garner enough press interest to launch and George has the potential to make a success of it with the same no monsense approach that Dave Ramsey has, but George has the advantage of not being pig-headed like unfortunately Dave Ramsey comes across like. The fact that Dave Ramsey didn't see how this was going to go if George backed down illustrates Dave Ramsey's arrogance. He would have donebetter if he and George had formulated a formal answer and even address it on the show together. New to your channel David, I've followed Dave Ramsey for a couple of years and do enjoy his approach but you David have been a much needed voice of reason. When I see Dave assuming 12% when I am getting 5% if I am lucky in my pension I used to get so frustrated. Now I know I am not alone. Looking forward to seeing more of you, cheers!
Use previous year's earnings to base your withdrawal rates. Higher yeild years equals higher withdrawals and lower yeild years would result in lower rates of withdrawal to avoid sequence of return risk. Stash away surplus dollars into buckets to use during lean years.
You have to remember, the people that are recommending at 4% withdrawal rate are also the ones recommending 40% bonds. When you do a 60/40 split you’re going to average 7%. Daves theory of 100% bonds with an average of 10-12% returns and withdrawing 8% most certainly works. You may want to be careful if the market starts to dip too much. But I would rather be able to do some years at 8% and bad years at 4%, instead of doing 4% all the time.
Amazing that Dave Ramsey won't back down. I wouldn't think he could question the data, unless he thought cherry picked? Even George said his source ran 10,000 simulations. Dave can't expect to be right every time in the short question time window for his show and I suspect that is why his show runs as a team, so they can give him a poke under the table if things start to go wrong. Dave looks to be a smart guy, but nobody is perfect.
If someone has no debt and the withdrawal is tax free, I see no issue pulling out 4% of $1 million. If social security is still a thing in 30 years that's just a bonus. $80,000 seems like a lot unless they're considering that for a married couple.
The baby steps prime people to be risk averse by paying off even low risk debt vs investing more than the minimum. DR is depending on customers who will be so risk averse that they work past 65. With a 20-year retirement timeline, a higher withdrawal rate is more feasible. Otherwise, it just makes no sense on its face.
What you spend that 8% on is irrelevant. Having your house paid off will lower your fixed expenses which will lower the number you are trying to achieve but it has nothing to do with the safe withdrawal rate. Both the growth rate of your investments and inflation have variance, this is what dictates the safe withdrawal rate. Also keep in mind this 4% number is not a guarantee. What they do is generate a random number and use that to get a rate of return using historical data. They do that for 30 years with a 4% withdrawal rate and see what is left over. Then they do that thousands of times. So the result is NOT if you withdraw 4% you will not run out of money over a 30 year period. It IS if you withdraw 4% you will most likely not run out of money over a 30 year period. Someone has to decide what "most likely" means, it is better to look at a graph of what the simulation produced and you will see something like 5% ran out of money and the next 5% has almost nothing left and so on till you get to the lucky however many % has more than what they started with. In real life you would adjust your rate of return based on where you fall in the lucky or unlucky sequence of returns in retirement.
This is where you can use a Ramsey tactic to your advantage, even if you work for the man. George should have enough money reserved to not fear whether or not Dave fires him (have a 6month+ Emergency Fund, Baby Step 3). Having this in mind, this allows for there to be that environment for discussion between George and Dave, without George feeling like he is cornered and sub-servant to Dave (even if it is something they disagree with).
I understand that DR and his team need to generalize financial advice/information for millions of users, each in a different state of life and finances. And by and large, his advice/information is good for the average American (the average American being someone who is in debt, can't handle a $1000 emergency, lives paycheck to paycheck, and has peanuts in their retirement account). But for the "financial mutants", those that are abnormal, have their act together, and who prioritize mathematical/statistical based decisions, the generalized advice of the DR team is more harmful than helpful. I'm thankful for channels like yours and The Money Guys who cater to us "financial mutants"!
The “how much you can/should take out” is a silly argument. The answer is simply, you take what you need. If your “needs” are a rate that will deplete your retirement faster than it accrues interest (or at a rate that will fully deplete the account by 10-20 years) - then you should probably re assess your retirement spending Cause realistically, when you’re retired, and have 1-2 million in retirement. Even if you don’t have a paid off home (which you should) - it should make enough in interest to pay any expenses; outside of crazy medical stuff, or vacations for 3 months on Maui
Dave is smart enough to understand the math. The fact that he won't concede, I think, is just a symptom of his ego. He's already invested too much public attention to his 8% for him to back off of it with his ego intact.
While you say George sticks with Ramsey 8%, you are wrong. In fact George was looking at the bigger picture and saying quite the opposite of your accusations and planned attack. If you listen maybe one more time, he said that it’s silly to argue percentages withdrawal overall because people are in different spots. I don’t think it’s wrong for him to take this approach and an advisor would help a person get down to specifics for what their needs are.
The mutual fund investing Dave promotes is 100% stocks. Mutual funds (and ETF's) are just products that make it convenient to buy a basket of other investments. While those investments can be stocks, bonds, or money market holdings, Dave only wants his followers buying actively-managed (i.e. not index-based) 100% stock mutual funds. Typically such funds have the highest fees and pay sales commissions. Dave won't ever say what ones to buy and instead drives his followers to his network of Ramsey-endorsed advisors. Those advisors get commissions on what they sell to Ramsey followers, and pay Ramsey referral fees. Ramsey likely also gets payments direct from the mutual fund companies for his unwavering support & promotion of their high-fee products. For whatever services Ramsey recommends, you can bet he's getting a commission.
I dont know, I think George was fair this time. The answer is: it depends. Even 4% might not be good enough if there's a massive crisis that last for a long time. Even George acknowledges that if yo can't adjust your lifestyle depending if it's going well or not you already failed. We're also not establishing when the person starts retirement which is crucial
Well he went from a hard line on 4% to really saying you could double that provided you have a million or more. It doesn't matter how much money you have. If you spend it at an 8% clip, you're still likely to run out of money prior to life expectancy 50% of the time.
@@DavidMcKnight Depends really, if you only expect to live for another 10 years you're fine. I think the issue here is also providing a % value and not an absolute number. 8% of 1 million is different from 8% of 10 million
I feel like everyone’s taking what George said out of context he is directly speaking to the FIRE movement. And honestly that’s what makes everything worse because had the caller mentioned the fire movement the tirade probably would’ve been much different or nonexistent.
If you watch the clip closely, at the very end he mentions a 4% withdrawal rate over a 30-year retirement. That statement is what the caller was referencing.
I believe when Jay asked Dave the original question that started Dave's tirade, it didn't specifically relate to FIRE. He noted that if his current nest-egg continued to grow until his eventual retirement he'd likely have more than enough to sustain a 4% withdrawal rate. His question was, given that, could he cut back on his current savings & investment rate knowing his retirement future will be funded?
@@dayrich If it's only a 30-year retirement it is by definition NOT a FIRE retirement. It means you're 60 or 65 and want your money to last for 30 years. 30-year-olds need their money to last for 50 to 60 years.
Keep in mind the Fidelity’s, Prudentials & Empowers of the world don’t want you to draw a lot of money out of your 401k account. The more money in there the more they make in fees! At 8% withdrawal rate with it invested Properly you would be fine withdrawing the 8%. Bottom line you need to adjust withdrawal rates based on how your investments moving. I promote having your 1st year in retirement funded by non retirement funds. And monies withdrawn not spent goes into an investment account…. In down markets you draw off that account to supplement your retirement. Bottom line is You need to be active in managing your portfolio, which means you need to know the basics and not rely on an advisor who will suck up your money with fees and direct you to funds that have a high cost and a big commission for themselves
But if you withdraw 8% per year there’s a 63% chance you run out of money prematurely in which case they won’t have anything to manage and earn fees from.
The funny thing about this is Ramsey could easily said "3% or 4%, whatever you want to do". Kinda the same thing he does when he says "estimate 10% or 12%, whatever you want to do". But because he's directly contradicted and it's being pointed out, he's gotta pummel little Georgie.
I listen to Ramsey Solutions and take some advice. There are flaws in the plan. I am not a religious person and I try to filter some of that when listening. I use credit card wisely. A few years ago I wanted to follow the plan and my husband gently said that their plan works for those who are not disciplined. George and his wife are in an albatross. Ever hear of putting all your eggs in one basket? Wow- what a mess.
I’m not sure what the big deal is. Following Ramsey’s plan you can withdraw more than the average person. 6-8%? Sure pal. However, the average person who isn’t as well off should probably withdraw less. Hence 4%.
This was hard for me to watch, since a large part of George's likeability is his honesty. It didn't appear that he believed what he was saying here.
Yes. The body language showed it.
If a 4% withdrawal rate on $1,000,000 causes you to lose hope, give up on a plan, and do nothing, then that is not a money problem or a math problem. There is a deeper issue going on; it’s a “you” problem.
40k a year with a paid off house is not a problem. I don't know how it could be. I live on 30k easily. I don't have a kid yet, so it would be virtually the same by the time I retire.
In this episode, George Kamel tries to keep his job while keeping a straight face and agreeing with the idiotic advice his boss promotes. We all heard what Dave said, George. He called you a moron and an idiot. George needs to talk to his coworker Ken Coleman about working in a toxic environment where the boss berates you publicly. I don't know how much Dave pays George, but apparently, it is enough to swallow your pride and agree with something that you think is wrong. Saturday Night Live couldn't have come up with a better skit.
He said he & his wife combined were worth 1 million when he was 32. He started working for Dave at 25, and his wife was better off financially than he when they met, and he also said he invested consistently. If this is the case, a salary of $120,000 could've gotten him to 1 million if he way investing the entire way, $840k if he never invested. That's also assuming his wife doesn't have a job. He probably makes around $100k.
I don't think this is enough for a college graduate who is very well spoken to deal with his boss talking about him this way live on air.
He just wrote a book; his book deal royalties probably pays him more than $100K a year alone given how many followers he has on his TH-cam channel. The accountant with 5 years experience at Corporate makes more than $100K alone on salary not counting bonuses. George is not being a weakling and a slave to his boss for $100K. He is a regular host on the show and Dave probably drops some serious change on George. @@rossmanngroup
Probably under contract with noncompete clause. Probably also not wanting to face the backlash of the Evangelical “Christian” right wing.
@@rossmanngroupSee my comment to the op of this comment thread.
Seems about right for someone lacking liquidity of FU money as it is all vested. Clearly wants to keep his job. I like George well enough. I like him when he is honest more. But everyone knows Dave likes his system over maths. Some of it is behavioural and useful, but the 8% withdrawl rate relies entirely on the invested capital making enough to cover it every year.
George and his wife both work at Ramsey, and they recently had their first child. He’s a hostage.
Yikes!
@@DavidMcKnight Yep. They need to diversify their source of income.
Sounds like just about everyone who is a W-2 employee.
@@KayFabe87not true… we can go work anywhere else.. where else will George go? Everything he does is owned and funded by Ramsey. And he no doubt has a no compete agreement so he can’t go start his own channel right after leaving. George’s whole career has been in Ramsey… I doubt he had enough negotiating power to have ANY type of leverage during his contract negotiations.
@@genxx2724 yeah george is such a slave... with that slavedriver boss who lets him(george) host his(dave)show and help people (including george) get out of debt 😂🤡
The whole thing is a joke. Everybody knows that 8% isn’t sustainable unless the market consistently goes up year after year which we know it doesn’t. Everybody but Dave Ramsey apparently. Obviously Kamel has to stay in line to keep his job.
I feel sorry for these people. The more they squirm and try to move the goal posts, the worse they look. At least Dave claims to be filthy rich and can therefor afford to ignore his own stupidity. Not sure how well these other clowns will fair though, wowow.
@@Rick-the-SwiftYou don’t know anything about these people. There’s no need to feel sorry for them because they’re all doing very well. You’re clueless
@@chrisl6238 Ok, well, I hope you feel better now. I still feel sorry for people who let arrogance, fear and ego get in the way of honesty. I don't care how much money they make. That's not all that life is about.
Wow Dave’s team is steering people off a cliff. Even if you have $20M, withdrawing 8% has a high likelihood of resulting in bankruptcy.
Exactly right.
Simple math. It is a withdrawal rate so it’s independent of how large your nest egg is. Stick to 4% or even less if you can.
Right the withdraw is complely separate from the amount of money you have or whether your house is paid off. What a dishonest person
This situation is a microcosm of what every person who works for someone else goes through, including George. Your thoughts are not your own. Your time is not your own. You have to conform to what the job requires of you. You can't fully be yourself. Your true beliefs must be held inside, while the company's beliefs are what comes out of your mouth. Now, is it the worst thing in the world? Nope, it's just part of the game. George will be just fine, but I'm sure he's got a nasty little taste in his mouth from this whole experience.
I mean, who knows the real cost humanity is paying for people not being able to tell the truth… it might be the worst thing in the world
Imagine being the caller who started all this. Man asked a simple question and it snowballed into George Kamel being taken hostage.
It's a trip, I tell you what.
George Camel: It's most definitely the 4% rate, maybe even 3%....[ Dave shouting in the background]... yeah definitely it's 8% rate 😀
LOL
I definitely shoot for under 4% withdrawal rate, the extra margin goes to self-insurance for long term care on the latter part of life.
@@alanwong8307This is exactly what George Kamel’s original video stated. Especially the younger you are when you retire.
If your home is paid off and you are debt free, it should theoretically be very easy to live off of $75k a year, with the occasional extra withdrawal if you need it.
I think I will be at around $2.5mil by the time I retire, and believe I could easily live off of ~2.95% of that, which would he ~$73,500. My wife will eventually also have a decent sized nest egg.
Even if the government robs us and doesn’t give us our social security, that should be enough to live comfortable on between age 65 and 95, and still likely have 85-90% of my original balance.
The thing is this: the majority of DR's listener base are those in debt trying to get out. They aren't good at math or wouldn't follow it even if they knew it. If they were good at math and followed it, they wouldn't be in debt to begin with. Personal finance is 80% emotional regulation. So his "in" with them is to appeal to their emotional side. Feel-good elements like hope sell. Most people, myself included, stop listening to DR once they get out of debt. People like me initially thought 12% returns were consistently possible. Once I got out of debt and started investing, I quickly learned that isn't happening.
Yep. If the Ramsey koolaid drinkers were good at math, they would realize paying off a 2% car loan while pushing 29% credit card debt to the back of the stack doesn't make sense.....
It’s disgusting how George trying to shame people who are trying to tell the truth as nerds, when he really knows the truth 😡. Intellectually dishonest.
Moral of the story do not trust Ramsey or George about anything. George is just trying to save his job but because of that we cannot trust him any longer.
I couldn't finish watching your video. I feel so bad for George. I heard his 4% recommendation, and then I heard Dave lose it. The poor guy had to choose his job over his integrity.
Is it just a misunderstanding of the timeline? George was referring to FIRE movement retirement where you're going to need a lot longer runway than you will if you retire at typical retirement age of 60-70 yrs old. The earlier you try to retire the more careful you will need to be with withdrawing money.
Nope. At the end of the segment George specifically advocates for a 4% distribution rate over a 30-year retirement.
@@DavidMcKnightYeah, but he didn’t take the video down… so… maybe he’s just being safe to not say anything bad about the boss, but still stands by the 3% for early retirees?
@@Kosree1 I think at this point he's just towing the party line.
@@DavidMcKnight He does specifically advocate against FIRE. But, he laid out a logical reasoning for why 4% is too high for someone who needs to live more than 30 years off of it.
@@davidmcknight8201 And, yeah, he is definitely towing party line, but also not taking down the video. On the backend, they probably discussed it and he likely got Dave to understand his video was anti-FIRE, and the 3% only applied to people trying to live for 50+ years off of their “magic walkaway number”
I feel so bad for George. I feel like he really knows his math but is stuck with having to conform to this bad advice.
"...I think, realistically, people adjust lifestyle depending on market conditions..."
Then it's not an "8%" withdrawl rate, is it? Lol
This dude compromised his beliefs and irrationally cast aside facts for fear of losing his job. Zero integrity.
Dave Ramsey's area of expertise is in helping people get out of debt and he has helped many people do that. However, he is not equally as adept at dispensing investment advice. Nothing wrong with that, but he could be a bit more open about acknowledging that investing and withdrawal rates are not his forte and that the math does not support a long term 8% withdrawal rate. Tom Brady was a great QB, but probably not the best RB, TE or kicker; hence he focused on his area of expertise and deferred to his teammates in their respective areas of expertise. It doesn't make him any less of a great football player just because he couldn't play every position with equal adeptness. Dave got a little over his skis with this advice.
Dave Ramsey follower here as far as the principles (baby steps). Definitely agree with some of the stuff you are saying. And I can't stand the way Dave responded to this caller or George. Honest question or comment is about the quote about 100% stock portfolio - is that referring to the fact that Dave only recommends mutual funds vs bonds, annuities, single stocks, etc?
Dave is an all stock mutual fund guy, as you know. You can get mutual funds with a mix of stocks and bonds. You can get mutual funds with all bonds. Dave sees bonds as a debt instrument (because they are). Thus, he rejects them on principle. He says as much in his books. Bonds are typically inversely conflated to the volatility of stocks - typically and not perfectly. Since this all blew up, I have been reflecting on this. I think to deny bonds, you must deny sequence of returns risk. The argument for bonds is sound on that principle. Dave has denounced asset allocation theory in the past, but asset allocation theory is designed to reduce sequence risk when in the distribution phase. QED: Dave must ignore sequence of returns risk in order to always deny bonds mathematically for principled consistency. There is an internal contradiction in the plan, and Dave is unwilling to consider any bond or bond alternative.
I remember in middle school when we started learning about interest/percentages. After spending a little bit of time playing around with numbers and doing some basic word problems, most children in this age range can understand that when you're talking about the time it takes something to appreciate or depreciate by a certain proportion of the principal, the amount principal is irrelevant - what matters is the percentage changes during each time period. It's incredible that Dave does not seem understand this, and that George clearly understands but has to deny reality to stay in his boss's good graces.
Seems like pre Covid Dave’s plan was solid and almost bulletproof but with this new inflation/increase of standard of living it’s almost impossible to follow unless you live poor until you retire.
If you live by his 10+% down and 15 year fixed rate mortgage for a house you’ll be working 80 hours a week for years in some markets just to meet those guidelines
Money hasn’t changed that drastically at all in 3 ish years. Dave is great at repackaging old advice to be easily understood and get people out of debt.
He’s NOT a financial advisor. He doesn’t understand that money in the market can be down for in some years, and that retirees drawing on their accounts can’t afford to be at risk of the whims of the downturn-> upturn ->downturn cycles.
Dave Ramsey sells real estate, planned advice for getting out of debt, and hope. That is his Wizard of Oz pitch. He cannot have his company (or anyone in it) bucking his system (biting the hand that feeds him, and by extension them). If people who are 600K in debt realized they're not 600K away from financial freedom, but really like 3.6 million away from their goal, they would never take any steps to get out of debt. That is what he said on the podcast (people in debt lose hope). George reiterated that here at the end (people aren't saving). The truth is, the point in which they learn they're not ever going to a 12% ROI in stocks, they don't need him anymore anyway. And so he knows his market is not fixed; its dynamic. Dave is hunting the next person in debt, not the last one who now has money. The guy who called in doesn't need Ramsey anymore. Ramsey is no fool. And George realized in a clash of egos, he's not in a position to take him on. Thats my take.
Great comment
That's a good analysis of Dave's target audience. Also I think that George has little choice. He has to cave to his overbearing boss or start looking elsewhere. It's a tough spot he's in. I'm sure that it's been a good learning experience for him. Maybe he will grow a pair eventually to contradict Dave or just move on to be free to give more accurate advice. Or just sweep it under the rug and move on with his high six figure salary and keep enjoying his Dave Ramsey personality status.
@@ryankiel4895 ---good points! It's hard to ask George to give up being a personality on the show (even if Dave is overbearing) because it makes him a household name and I'm sure he's well compensated. A good soldier backs their general even if the plan is bad, once the plan is public!
@@ryankiel4895 he is popular enough now to do his own thing without being on the leash of Dave Ramsey. But instead he decided to remain on Dave Ramsey's leash.
George made an interesting statement. 3:12 . He said if the stock market returns 10% (instead of 12%) then you can draw 6%. This fails when the stock is down 14%. You would need to withdrawl -18%. In other words, you would have to add money back into your portfolio. So, totally unrealistic and idiotic.
Dave Ramsey helped me over 25 years to get my finances in order, but I did not like how he called people stupid in the videos. There is nothing wrong with having a credit card if you can pay it off when your statement comes in. Things have changed over these 25 years and looks like his course is still the same. You have to change with the time and I do believe if Rachel takes it over, it will start changing. I have been wanting to do a financial ministry, but as of this time, I can't go with "Financial Peace".
Great comment.
The stock market has had (3) 10 year stretches during the last 100 years where the market showed a loss, 1930-1940, 1965-1975 & 2000-2010.
If a retiree lived through just one of those periods while withdrawing 8% a year, he or she would be looking for a job.
Exactly, thats how the one-size-fits-all coolaid works, just ignore the situations where it doesn't and keep preaching!
Your comment is why I'm not sold on the following talking point for stocks-only investing:
"oh, well, if the stock market had long years of decline, then you would have much worse things to worry about than retirement savings! at that point, you need ammo, food, and water bottles! not stocks or bonds!"
We didn't have an apocalypse in any of those periods you mentioned, yet still had long periods of market decline.
George works for Ramsey so he has to agree with Dave. But i agree with he’s real belief. If you retire early 30-40 year old. A 3% is a safe approach to not running out of money.
George looked way uncomfortable. You could tell what he was saying wasn’t jiving with his body language. If you have a giant nest egg then why would you need the 8%. It’s only when you barely have enough to retire on that you’re going to need the push the limits. Even his words were trying to tell the truth but he knew he couldn’t say, “Dave’s wrong! He’s a little bitch and is making me say these ridiculous things or I’m fired.”
He did very much look ill at ease. He knew he was doing an about face that didn’t square with his core principles.
If George were brave, he would quit and go out on his own. He won't because he's simping.
The older you are, the better the position to draw more %.
@@richardlee5536he might have a contract that makes doing so difficult for the time being. Perhaps a strict no-compete or perhaps he is waiting for a large bonus to mature at the end of the current contract term, in which case he bites his tongue a bit longer.. I wouldn't be surprised if George eventually cuts ties with DR and turns against DR's message.
@@philipgerry5228yes, because the older you are the closer you are to death.
George Kamel is like Jack Nicolson in one flew over the cuckoo’s nest after they gave him the lobotomy. 🤣🤣🤣
The idea that Jay did anything to make George or Dave look bad "maliciously" is absolutely ludicrous.
Agreed.
my understanding of Ramsey's point it you can pull average return (let's assume it's 10%) minus inflation 4pp (minus 1pp to stay conservative) = 5%. Now that's in the first year, but each year you would extract 5% of the balance you have, not of the 1st year balance. So for that sequence of risk return, with a few bad years at the start of retirement, if after one year you extracted 5% and market dropped by 30% then the next year you would extract 5% of the remaining balance only. Aka, if you had 1 mil and you extract 50k. Next year, you had 700k only (due to market correction) then you only extract ~35k (5% of 700k).
I know that makes it less predictable, but the predictable part is SocialSecurity and I'm assuming most Dave Ramsey followers after 30 yrs of gazelle debt payoff+ frugality and budgeting, should be frugal enough to give more than consume to sustain their lifestyle..
When George sold out, he lost my respect.
Great video for calling out more Ramsey negligence
Just like his daddy trump, Ramsey is surrounded by yesmen an insulated from any fair criticism. Listened to the original caller's interview on this channel and now learning that the producers called his question "malicious" is wild. Tells you everything you need to know about the ramsey world.
Yes. Bizarre.
Why is nobody saying this:
You can withdraw 8% but not spend every penny? How about withdraw 8% and spend half? Have a little "money in the mattress"
Why would you withdraw 8% if you don’t need it? Particularly if it incurs a tax and you then lose the tax deferral on that money?
George’s episode was talking about FIRE and retiring at 35. He did take it out of context and you knew that but failed to mention that for drama and clicks. Slimey and gross on your part man.
Your incorrect. It’s a 4% rule no matter what age you retire . Look up negative sequence of return risk . Also there are periods of time where the market does nothing for a decade
Whenever D.R is asked a question on the
lumpsum vs the annuity payout option he will cite his 8% withdrawal rate and always 100% of the time go with the lump sum option without asking anything about the callers personal financial situation
.
Daves PR people are working overtime on this one.
Flawed methodology pervades his whole worldview.
If someone is sitting on cash of about 3 years of expenses, they can aggressively withdrawal from their retirement. In down years, they can spend their cash instead.Then in good years, replenish the cash and withdrawal for expenses. But it’s tough for most to save 3 years of cash.
You arent taking into account how Ramsey can pick the exact mutual fund every single time with zero mistakes and make 15% plus every year. And even though the same fun will never continuously beat the market Ramsey knows how to pick the exact right one every single time, 15% interest forever with zero mistakes. You can easily take 8%, dave has a special power you need to understand that
George was for the 4% rule before he was against it.
The issue with a n% withdrawal rate set at retirement date is that it doesn’t adjust to what has actually happened, good or bad. So you can have a 60yo and an 89yo with exactly the same equity, and the 4% rule would be telling the 60yo they can withdraw more than the 89yo, because the latter’s 4% + inflation is based on whatever their equity was worth 29 years ago.
I wanted to let this one slide, but it fell naturally into the topic I have planned for this upcoming Tuesday. You can expect an emotional response from me next week. Thank you for covering the technical truths behind the inconsistent arguments made in this interview.
Thanks for chiming in Jay. Grateful for your courage to address this topic with Dave in the first place.
Also, bless you for defending my reputation. That was honorable. Thank you.
You were malicious?
I used to be a hard core Dave follower. As I learned more and more about investing (walking through baby steps 4-6) I started to realize there was a lot to be desired from Dave’s investment advice.
Dave has become a “get off my lawn” man and is also a bully. If you challenge anything he says he’s going to belittle you and gaslight you. He can’t allow independent thinkers because you wouldn’t need him anymore. His arrogance and God complex needs to be checked.
I can’t believe that someone who has done so much for the Ramsey brand (you becoming a Ramsey financial coach) would be talked about like that. Shows me that they don’t give 2 craps about their customers.
@@hopefilledfinancial You're an honorable standup guy which made it very easy to do.
@@gthree0239 Perhaps we are both recovering Ramsey followers now.
It makes me sad to say this is the second time George has said such about me and my intentions publicly. I ignored the first time around other than to ask for mutual forgiveness for unintended ills directly. This time was much more public, and an answer can be merited.
Believe it or not, I even paid for the RPC program for a few months. I coordinated with members of Dave's staff in an effort to improve his budgeting app with my own ideas. I have hosted FPU at my church. I own so many books... I don't know if I could have been a more avid follower leading up to this. I doubt they know all that though.
Had I not been that invested in Dave's work, I probably wouldn't have felt compelled to speak up about this at all.
I don't think the total nest egg is the argument on whether its 4% or 8% in order to not run out. If you are taking out 8%, you are at least double if not 2/3 more likely to run out than you would at 4% considering both inflation and other factors. You could have $1m or $2m, but the rate of taking out of either 4 or 8 % still affects the money. If people are living 30, 40, 50 years after retiring, then even at $10m, you're going to run out if you are drawing it down, unless you are going to take less in each future year.
Right. Not to mention most people will need to spend more and more every year to be cared for as they grow old. Insurance stops covering you as those medical expenses go up, etc.
Dave also needs to think about the tax implications of taking out 8% of a $1m portfolio... That eats into what you can live off of
@@Todesjaeger00not if it’s Roth, in which case it’s not taxed correct?
I’m curious if newer investment options would bump the SWR higher. I own a good stack in JEPI and JEPQ. It seems they help mitigate sequence of events risk. I have yet to sell a share in retirement. In fact I keep adding.
Poor George sounds like he's reading a hostage letter.
My favorite is your mortgage must be a 15 year with the total monthly payout no more than 25 percent of your monthly take home income. There are many parts of this country where that just dosen't work, especially when you consider the taxes.
In other words, parts of the country where nobody should even be considering buying a home?
Ramsey was yelling and making fun of callers back in spring 2021 who called asking about possible inflation..... he would laugh at them, teasing that he knew they'd fallen down conspiracy theory youtube holes...... see how well that has aged.
The whole thing is a big joke. The FA who are now preaching this 4% rule, don't seems to also explain what that means. Most people will barely having 1M in retirement which means you be pulling around 40k a year, that's huge drop from someone making 6 figures lets say. Which means you better plan to save closer to 2.5M or 3M to follow that 4% rule to keep a 100k yearly income, however that means doubling or tripling your retirement contributions probably closer to 20% of your income. This is where people lose hope when you look at the numbers can you can't come close to what you need. So 4% is a harden rule to follow in withdraws, but your retirement contributions don't worry it's just want you can put in.
Wow! You should be an investigative reporter! Great work! Poor George got beat up by Dave and now has to cover for the incident because no doubt he has an NDA with Dave, and could never say anything remotely disparaging about Dave. You can tell in George's responses to Graham and Jack, that he's showing restraint as to not violate his NDA.
Thanks for your kind works. Yes George looked very uncomfortable.
He did still give advice that disagrees with Dave. $2mil at 8% as opposed to $1mil at 4%.
But we also have to remember George's original advice was for people doing FIRE at 30.
George is smart. He seems to know how to handle the situation he's in.
This is 100% math. It doesn't matter how much you have, it's how much you can grow your money on average over time. If you are actively managing your portfolio in such a way that you are reliably growing your portfolio at 12% every year, on average and without fail, then yeah, take 8% every year. But if your portfolio cannot maintain an average growth that performs as well or better than your withdrawal rate plus inflation then, at worst, you run out of money in 10 years (assuming 0% growth and not negative growth, also adjusting for inflation at 4%). At 10% growth, you run out of money in 20 years.
This is an amazing video. I'm tired of people saying how many people Dave Ramsey has helped. With something as drastic as an 8% withdrawal rate, all that saving and snowballing will be a waste and you will be in a worse situation. It's like saying, "Ive helped million build a house of cards, and then tell them you can safely pull cards from the bottom, when you need them without risking the tower from falling down"
Dave’s FIRE method is great, but the rest is questionable.
@myrtle471 I agree. I love how he helps people get out of debt. But his Sequence of Return theory is going to cause a generation to fail. And he will be passed on by the time they do it.
He has multiple streams of income. Books, podcast, TV, youtube, seminars, training programs, affiliate programs. I'm sure he is fine pulling 10% from his investments and living on the edge.
There is no problem with the math when you are contributing...the problem comes when you retire and no more income or very little is coming in.
@@FASTDTpodcast you are absolutely correct
I'm not a fan of Dave or George, but think George was more accurate than Dave. Dave needs to go on another extended vacation.
Poor George!!! He is a follower to a Darn NARCISSIST!!!!!!!!
Anyone wholives in the USA is a narcissist. What's your point?
The real issue: Dave Ramsey Uses simple math in some situations and complex math in others, all to align with his "rules". He will say you should pay off the 4% mortgage early even though according to him you're guaranteed 12% in "good mutual funds", because a simple equation does not account for risk. He's right. But why doesn't he account for risk when assuming you can withdraw 8% from a nest egg? Has he never heard of "sequence of returns risk"? Why can use he use 12-8=4 in retirement accounting but not 12-4=8 as a reason to not pay off the mortgage early? He lacks consistency and its obvious.
Great comment.
Bucket strategy or the Barbell strategy then 8% withdrawal is doable as long as sequence of withdrawals are time properly.
George probably felt like a us press secretary on this one 😅
The issue isn't 4% or 8%, the question that must be asked first is at what rate is your nest egg growing? Dave's 12% is super aggressive for folks who have a small nest egg. People with small nest eggs probably want to be positioned at a much more stable 5-6% expected rate of return, because they can't afford to see negative returns over a year or two to experience massive gains by year three or four, especially if they're expecting to drawdown those investments to live. Drawdowns in negative years can be catastrophic to a nest egg. My boys 529 plans earn about 5-6%, and they have seen very little to no market volatility over the years.
All in all, I'm glad there's a debate about saving and investing, not about what useless thing is the best to buy that's popular.
I don't know anything about this stuff and this issue how I first became aware of the concept "Safe Withdrawal Rate".
So the thing I'm thinking about is this - I watched a 401 lose 19% in one year (2022). Seems to me, if you've already retired and your account experiences THAT, then you're in a bad place whether you were at 8%, 4%, or 1%. I have another 20 years... so it's more of a minor speed bump. I'd guess the closer you get to retiring, the more you're interested in preservation of principal and your investments would reflect that.
I think Ramsey's response to this notion of a more conservative 4% is disproportionate and I have no idea why he would go off so hard about it.
Correct me if I’m wrong, but if you have 1M in retirement, and you have a annual return that year for 10%, can’t you withdrawal that 10% gain and not touch the initial 1M….????
Sure, you can do it that one year, but you're not going to have that experience every year. The question is, how much can you take out on a sustainable basis, regardless of what the stock market does year in and year out? And 10% annual withdrawals will bankrupt you within about 15 years in most cases.
The problem is you likely have minimum withdrawals required to live on. Say you need $50,000 a year to live and $1 million in your 401k.
Year 1 stock market increases 10% and you withdraw $100,000 to take advantage of the returns. Still $1 million in your 401k
Year 2 stock market drops 20%. You drop to minimum withdrawal living requirements of $50,000. 401k value $750k
Year 3 stock market drops 10%, you withdraw minimum $50,000. 401k value down to $625k.
So in 3 years you went from $1 million in your 401k down to $625k. The odds this portfolio will give you the $50,000 a year in minimum income you require is very low, especially eleven you adjust for inflation.
Safer to cap your withdrawals at 4% and ensure you have a stable retirement
The emperor has no clothes.
#truth
You HAVE to put the original caller's age into context, as well as the age of people Dave suggests can take 8%; they are different. Someone retiring at 40 shouldn't take 8%. Someone retiring at 70 probably should consider it. That's what the whole kerfluffel was about, really.
You can hear it in his delivery that he doesn’t personally back that 8%.
I heard Dave’s rant and found it unfortunate that he couldn’t be flexible enough to appreciate the more conservative (and clearly safer) 4% rate of withdrawal.
We understand George that you have to tell the company line
my guess is that whatever percentage of a retirement fund gets taken out would depend upon the life style of the person. And the amount within a retirement fund also depends on the persons life style.
This is why having guaranteed lifetime income that increases over time is important to never run out of money in retirement.
He put daves conditions around the 8%...yea if your house is paid off, money in bank, $2m in retirement account, etc etc... everyones financial situation is different...Id rather err on the conservative side...
At 65, you have less than a 10% chance of 11:10 living to 95. The odds of living past 75 are hardly certain. There is a reason insurance companies are comfortable modeling 6.5% immediate annuities at 65.
25% when you consider you and your spouse’s joint life expectancy.
I’m a modest guy I don’t know much. But it seems to me if you wanna be conservative and take out only as much money as you need to be safe you should be encouraged to do that
LOVING YOUR FORENSIC BREAKDOWN DAVID WOW!!! George would have been better sticking to his opinion, getting fired and creating the Kamel Solutions company. He'd garner enough press interest to launch and George has the potential to make a success of it with the same no monsense approach that Dave Ramsey has, but George has the advantage of not being pig-headed like unfortunately Dave Ramsey comes across like. The fact that Dave Ramsey didn't see how this was going to go if George backed down illustrates Dave Ramsey's arrogance. He would have donebetter if he and George had formulated a formal answer and even address it on the show together.
New to your channel David, I've followed Dave Ramsey for a couple of years and do enjoy his approach but you David have been a much needed voice of reason. When I see Dave assuming 12% when I am getting 5% if I am lucky in my pension I used to get so frustrated. Now I know I am not alone. Looking forward to seeing more of you, cheers!
Thanks my friend. Welcome to the channel.
You can justify a lot of crazy things if one of your core operating assumptions is a 12% return.
Use previous year's earnings to base your withdrawal rates. Higher yeild years equals higher withdrawals and lower yeild years would result in lower rates of withdrawal to avoid sequence of return risk. Stash away surplus dollars into buckets to use during lean years.
You have to remember, the people that are recommending at 4% withdrawal rate are also the ones recommending 40% bonds. When you do a 60/40 split you’re going to average 7%. Daves theory of 100% bonds with an average of 10-12% returns and withdrawing 8% most certainly works. You may want to be careful if the market starts to dip too much. But I would rather be able to do some years at 8% and bad years at 4%, instead of doing 4% all the time.
Amazing that Dave Ramsey won't back down. I wouldn't think he could question the data, unless he thought cherry picked? Even George said his source ran 10,000 simulations.
Dave can't expect to be right every time in the short question time window for his show and I suspect that is why his show runs as a team, so they can give him a poke under the table if things start to go wrong. Dave looks to be a smart guy, but nobody is perfect.
If someone has no debt and the withdrawal is tax free, I see no issue pulling out 4% of $1 million. If social security is still a thing in 30 years that's just a bonus. $80,000 seems like a lot unless they're considering that for a married couple.
It would be 4% on any cumulative balance between husband and wife.
Dave should continue to help folks get out of debt only!!!!!
The baby steps prime people to be risk averse by paying off even low risk debt vs investing more than the minimum. DR is depending on customers who will be so risk averse that they work past 65. With a 20-year retirement timeline, a higher withdrawal rate is more feasible. Otherwise, it just makes no sense on its face.
dave ramsey is a business. that business doesn't care about your well being. nuff said
What you spend that 8% on is irrelevant. Having your house paid off will lower your fixed expenses which will lower the number you are trying to achieve but it has nothing to do with the safe withdrawal rate. Both the growth rate of your investments and inflation have variance, this is what dictates the safe withdrawal rate.
Also keep in mind this 4% number is not a guarantee. What they do is generate a random number and use that to get a rate of return using historical data. They do that for 30 years with a 4% withdrawal rate and see what is left over. Then they do that thousands of times. So the result is NOT if you withdraw 4% you will not run out of money over a 30 year period. It IS if you withdraw 4% you will most likely not run out of money over a 30 year period. Someone has to decide what "most likely" means, it is better to look at a graph of what the simulation produced and you will see something like 5% ran out of money and the next 5% has almost nothing left and so on till you get to the lucky however many % has more than what they started with. In real life you would adjust your rate of return based on where you fall in the lucky or unlucky sequence of returns in retirement.
I love george, i love his videos. But here, his personality is not there. You can tell DR shook him
This is where you can use a Ramsey tactic to your advantage, even if you work for the man.
George should have enough money reserved to not fear whether or not Dave fires him (have a 6month+ Emergency Fund, Baby Step 3).
Having this in mind, this allows for there to be that environment for discussion between George and Dave, without George feeling like he is cornered and sub-servant to Dave (even if it is something they disagree with).
I think it’s because most people don’t understand that the 4% is on top of inflation after the second year
I understand that DR and his team need to generalize financial advice/information for millions of users, each in a different state of life and finances. And by and large, his advice/information is good for the average American (the average American being someone who is in debt, can't handle a $1000 emergency, lives paycheck to paycheck, and has peanuts in their retirement account). But for the "financial mutants", those that are abnormal, have their act together, and who prioritize mathematical/statistical based decisions, the generalized advice of the DR team is more harmful than helpful. I'm thankful for channels like yours and The Money Guys who cater to us "financial mutants"!
Great comment. This is basically the basis of my next book.
The “how much you can/should take out” is a silly argument. The answer is simply, you take what you need.
If your “needs” are a rate that will deplete your retirement faster than it accrues interest (or at a rate that will fully deplete the account by 10-20 years) - then you should probably re assess your retirement spending
Cause realistically, when you’re retired, and have 1-2 million in retirement. Even if you don’t have a paid off home (which you should) - it should make enough in interest to pay any expenses; outside of crazy medical stuff, or vacations for 3 months on Maui
Dave is smart enough to understand the math. The fact that he won't concede, I think, is just a symptom of his ego. He's already invested too much public attention to his 8% for him to back off of it with his ego intact.
And people would start questioning his other advice as well.
While you say George sticks with Ramsey 8%, you are wrong. In fact George was looking at the bigger picture and saying quite the opposite of your accusations and planned attack. If you listen maybe one more time, he said that it’s silly to argue percentages withdrawal overall because people are in different spots. I don’t think it’s wrong for him to take this approach and an advisor would help a person get down to specifics for what their needs are.
You mentioned the experts were talking about a stock portfolio. That is not exactly what. Dave Ramsey adheres to with his mutual funds.
The mutual fund investing Dave promotes is 100% stocks. Mutual funds (and ETF's) are just products that make it convenient to buy a basket of other investments. While those investments can be stocks, bonds, or money market holdings, Dave only wants his followers buying actively-managed (i.e. not index-based) 100% stock mutual funds. Typically such funds have the highest fees and pay sales commissions. Dave won't ever say what ones to buy and instead drives his followers to his network of Ramsey-endorsed advisors. Those advisors get commissions on what they sell to Ramsey followers, and pay Ramsey referral fees. Ramsey likely also gets payments direct from the mutual fund companies for his unwavering support & promotion of their high-fee products. For whatever services Ramsey recommends, you can bet he's getting a commission.
I dont know, I think George was fair this time. The answer is: it depends. Even 4% might not be good enough if there's a massive crisis that last for a long time. Even George acknowledges that if yo can't adjust your lifestyle depending if it's going well or not you already failed. We're also not establishing when the person starts retirement which is crucial
Well he went from a hard line on 4% to really saying you could double that provided you have a million or more. It doesn't matter how much money you have. If you spend it at an 8% clip, you're still likely to run out of money prior to life expectancy 50% of the time.
@@DavidMcKnight Depends really, if you only expect to live for another 10 years you're fine. I think the issue here is also providing a % value and not an absolute number. 8% of 1 million is different from 8% of 10 million
George was talking about the withdrawal rate of you were following FIRE and retiring early. 8% draw is a bit much. 5% is much more reasonable.
When George said 4% he was talking about the fire movement. Not regular retired people. They are making something that isn’t really a big deal
Nope. Watch it again. He said 4% for a 30 year retirement. That’s why everyone is exercised.
@@DavidMcKnight I watched the whole video. He was talking about the fire movement.
re-Watch the very last sentence in the George portion and you’ll see what I’m referencing
You can tell by George's body language, he's not on board. Shoulders shrugging to me is the give away
I feel like everyone’s taking what George said out of context he is directly speaking to the FIRE movement. And honestly that’s what makes everything worse because had the caller mentioned the fire movement the tirade probably would’ve been much different or nonexistent.
If you watch the clip closely, at the very end he mentions a 4% withdrawal rate over a 30-year retirement. That statement is what the caller was referencing.
I believe when Jay asked Dave the original question that started Dave's tirade, it didn't specifically relate to FIRE. He noted that if his current nest-egg continued to grow until his eventual retirement he'd likely have more than enough to sustain a 4% withdrawal rate. His question was, given that, could he cut back on his current savings & investment rate knowing his retirement future will be funded?
Do you have Qualified Vetted financial planners for Canadians ? ( your posts are on the WWW) so lots of persons that watch or not in the good old USA
I watched the video. The video was on the FIRE movement. He says it's a bad idea to live on 4%. The call was definitely taken out of context.
Watch it again. At the very end of the clip he says 4% is the acceptable rate for a 30- year retirement.
in his video: george was mentioning the 3% rule for people who retire early. you missed the whole point.
Sigh. Watch it again and you’ll see he referenced the chart at the end where he s
says 4% is the sustainable withdrawal rate for a 30-year retirement.
@@DavidMcKnight yes 30 year retirement for those who are wanting to do the fire movement. i listened.
@@dayrich If it's only a 30-year retirement it is by definition NOT a FIRE retirement. It means you're 60 or 65 and want your money to last for 30 years. 30-year-olds need their money to last for 50 to 60 years.
Keep in mind the Fidelity’s, Prudentials & Empowers of the world don’t want you to draw a lot of money out of your 401k account. The more money in there the more they make in fees! At 8% withdrawal rate with it invested Properly you would be fine withdrawing the 8%. Bottom line you need to adjust withdrawal rates based on how your investments moving. I promote having your 1st year in retirement funded by non retirement funds. And monies withdrawn not spent goes into an investment account…. In down markets you draw off that account to supplement your retirement. Bottom line is You need to be active in managing your portfolio, which means you need to know the basics and not rely on an advisor who will suck up your money with fees and direct you to funds that have a high cost and a big commission for themselves
But if you withdraw 8% per year there’s a 63% chance you run out of money prematurely in which case they won’t have anything to manage and earn fees from.
The funny thing about this is Ramsey could easily said "3% or 4%, whatever you want to do". Kinda the same thing he does when he says "estimate 10% or 12%, whatever you want to do". But because he's directly contradicted and it's being pointed out, he's gotta pummel little Georgie.
Isn't the 4 percent rule only for early retirement? I feel like that's where the disconnect is coming from between Dave and the others.
What do you do when your house needs a new roof? New HVAC?
You would need a discretionary account!
@DavidMcKnight That's my point
Hard to have that much COH
25k for a roof and 13k for HVAC. Water heater is 4k.
I listen to Ramsey Solutions and take some advice. There are flaws in the plan. I am not a religious person and I try to filter some of that when listening. I use credit card wisely. A few years ago I wanted to follow the plan and my husband gently said that their plan works for those who are not disciplined.
George and his wife are in an albatross. Ever hear of putting all your eggs in one basket? Wow- what a mess.
I’m not sure what the big deal is. Following Ramsey’s plan you can withdraw more than the average person. 6-8%? Sure pal. However, the average person who isn’t as well off should probably withdraw less. Hence 4%.
George's behavior and 180 on this position makes some of the horror stories from some Ramsey employees seem more credible.
Sure does.