Dave Ramsey rips the 4% rule again today.

[TickTock]

YVRRocketSurgery,

That's a long video, but also an impressive panel of experts and good topics. On the queue to watch. Thanks for sharing!

 

[RetMD21]

Dave Ramsey is often angrily and aggressively and completely wrong.

He shows zero understanding of sequence of return risk.

I don’t think anyone should look to him for advice on anything, since he seems incapable of actually thinking about anything in a non-rote, dogmatic manner.

Yuck.

I think it's worse than that. He understands but chooses to double down on 8% because to admit he is wrong would threaten his status as the ultimate expert on all financial matters.

 

[YVRRocketSurgery]

YVRRocketSurgery,

That's a long video, but also an impressive panel of experts and good topics. On the queue to watch. Thanks for sharing!

Yep, their videos/podcasts are generally pretty long. I generally don't watch their video versions unless there's something important visually. Instead, I just pop on the earbuds and listen to the podcast version while out for a walk and just rewind if I get distracted.

 

[Koolau]

Thanks for the video. It helps put into words a lot of the theory that I live by. SORR explanation (with example) was excellent.

 

[mathjak107]

That makes sense. Here's a link to Morningstar. You can get 4.6% with TIPS alone. The link explains a bit about their recommendations for 2023. Of course some people aren't going to be influenced by changes in expected returns.

https://www.morningstar.com/retirement/good-news-safe-withdrawal-rates

the problem with tips is taxes and the fact it tracks no one’s personal cost of living .there can be quite a bit of over drawing going on

plus remember , 90% of all 123 rolling 30 year periods have ended with more than you started with 30 years later with a 50/50 to 60/40 . 67% of the time you ended with 2x what you started with.

tips can leave you on empty 30 years later , so big difference

good interview with christine benz and kitces , where kitces talks about using tips alone, which he isn’t a fan of doing

https://www.morningstar.com/retirem...-affect-asset-allocation-retirees-preretirees

 

[clifp]

Reminds me of Jimmy Stewart "George Baily" in "Its a wonderful Life" when he got into it with old man Potter when they argued about the "Building and Loan" anfd George giving mortgages to people that Potter's bank declined. Potter suggested that people save more and buy a house later.....George Baily responded "Wait? Wait for what? Do you know how long a working person has to wait to save $5,000 (the cost of a new home at the time.) George Baily said "Is it wrong for a man to want to live in a house with a decent roof and a bath before his children move away?

This said I had a 15 year morgage when I bought my house at age 28 in 1993. 7% fixed. I kept it the whole term, best thing I ever did. If I hadn't bought the house it would have increased in value faster than I could have saved money and my rent would have went up too, plus I liked living in my house.

Where did Dave Ramsey get his education and credentials to deserve to be listened to ? I don't dislike him, I just don't know what makes him an expert.

William Bernstein (who's written on retirement issues also) book "The birth of plenty" traced the growth of the marketplace from the Middle Ages to modern day. One of his main points is that American system of credit not only for mortgages, but credit cards, student loans is actually one of the US hidden's strengths. Now obviously, there is good debt and bad debt. It is not really a good idea to buy a Superbowl or Taylor Swift ticket on a credit card and paying it off over a year.

But there are huge benefit to society, that we let young people get an education at age 18, rather than making them wait until they can save up for college. Imagine if we require doctors pay cash for going to Med school. Doctors would start practicing at 50 and then want to retire in 15 or so years.

Likewise, it good for society that parents with kids can buy a home via mortgage. Even kids who don't graduate from high school, can buy a car with credit (albeit expensive). This greatly expands the number of jobs they can do.


Ramsey, practically never mention the benefits of debt, other than saying mortgages are ok. As for what qualifies him to be financial advisor, it is damn good question, same is true for Suze Orman.

 

[mathjak107]

Then it’s not considered a safe withdrawal rate. It’s just a withdrawal rate

A safe withdrawal rate has a specific meaning and criteria it has to meet

 

[mathjak107]

If you aren’t a worst case outcome then it can be 6-1/2%

But no one knows if they are day 1

The updated trinity study which uses different bonds then bengan failed at 4%

 

[Wile E. Coyote]

If you aren’t a worst case outcome then it can be 6-1/2%

But no one knows if they are day 1

The updated trinity study which uses different bonds then bengan failed at 4%

Mr. Mathjak, I have never heard you talk much about rebalancing. Maybe you have, but, I did not hear it? Do you rebalance quarterly or annually or wha?

 

[mathjak107]

once a year we fill up whatever we are short ..we use the income model to rebalance any short fall .

all year we channel all dividends ,interest and fund distributions from the taxable account into a buffer for the upcoming year .

so we just rebalance the income model a bit lower and fill the short fall every end of dec.

 

[RetMD21]

the problem with tips is taxes and the fact it tracks no one’s personal cost of living .there can be quite a bit of over drawing going on

plus remember , 90% of all 123 rolling 30 year periods have ended with more than you started with 30 years later with a 50/50 to 60/40 . 67% of the time you ended with 2x what you started with.

tips can leave you on empty 30 years later , so big difference

good interview with christine benz and kitces , where kitces talks about using tips alone, which he isn’t a fan of doing

https://www.morningstar.com/retirem...-affect-asset-allocation-retirees-preretirees

I was surprised that you were responding to my post from November. Of course, Tips have to be held in a tax advantaged account and a tips ladder will expire.

I looked at your Morningstar link from May. One of Kitces criticisms of TIPS ladders was the low real yields in the past. When I posted the yields were at historic highs as noted in my Morningstar link.

I wasn't advocating 100% TIPS as a real strategy but trying to defend Morningstar's increase of their SWR recommendation to 4% based on changing conditions vs 3.8% in late 2022 and 3.3% in 2021. Folks were arguing for a rate that didn't change with market conditions.