Dave Ramsey rips the 4% rule again today.

[2HOTinPHX]

I don't know. Maybe they just want to show off.

I sometimes feel the same way when I read some of the posts on this site. When I read things like can I retire on 3 million I ask myself are these people really serious? I remind myself that some people are just worker bees like me and others are highly motivated, driven people with high paying successful careers. So some people are accustomed to a much higher dollar lifestyle in a HCOL area with a large home or multiple homes worth $$$$ and more expensive cars. It's just their everyday expenses for them. I try to keep that in mind when I see or hear people questioning if they can afford to retire on multiple millions. It probably is a real concern to them based on the lifestyle they are accustomed to.

Disneysteve mentioned there is not a lot of good info on the spend down phase of life. I think that is because there are so many variables and unknowns it is hard to come up with a good plan. There are so many opinions on it, it really requires a leap of faith to turn off the paycheck with all the uncertainty. That's why I started this thread for those considering OMY...

https://www.early-retirement.org/fo...r-those-considering-one-more-year-118539.html

 

[dheb]

That’s exactly what we are doing (100% equities) except we have rental properties that generate income and we can always sell a rental property to minimize SORR but I agree with Dave and other “experts” (like Ken Fisher) who suggest retires have a very high equities allocation. It’s not for everyone so no need to bash those of us who choose to have high equity allocations just like I don’t bash people who feel they need a more “conservative” allocation.

Well, 100% equities _isn't_ exactly what you're doing. You have diversified your investments. You have an income stream so you don't have to sell equities in bear markets; and whatever amount you have in those properties is the portion of your portfolio that isn't in equities.

 

[LateToFIRE]

I sometimes feel the same way when I read some of the posts on this site. When I read things like can I retire on 3 million I ask myself are these people really serious? I remind myself that some people are just worker bees like me and others are highly motivated, driven people with high paying successful careers. So some people are accustomed to a much higher dollar lifestyle in a HCOL area with a large home or multiple homes worth $$$$ and more expensive cars. It's just their everyday expenses for them. I try to keep that in mind when I see or hear people questioning if they can afford to retire on multiple millions. It probably is a real concern to them based on the lifestyle they are accustomed to.

Disneysteve mentioned there is not a lot of good info on the spend down phase of life. I think that is because there are so many variables and unknowns it is hard to come up with a good plan. There are so many opinions on it, it really requires a leap of faith to turn off the paycheck with all the uncertainty. That's why I started this thread for those considering OMY...

https://www.early-retirement.org/fo...r-those-considering-one-more-year-118539.html

Guilty as charged. I got a bit of hazing in my first tone-deaf introduction post on the board. I sounded exactly like what you're describing, high income, high NW, expensive lifestyle, absolutely no clue as to how to transition from earning to no-earnings and a lot of anxiety trying to get my arms around that. Realistically, I know we are never gonna be poor, just need to convince my brain of that.

The anxiety remains, but I've learned much from y'all and now see that the anxiety is largely unfounded and just fear of taking the big leap.

P.S. Deep respect for all the folks who've figured out how to do this far more efficiently and earlier than me.

 

[Andre1969]

Guilty as charged. I got a bit of hazing in my first tone-deaf introduction post on the board. I sounded exactly like what you're describing, high income, high NW, expensive lifestyle, absolutely no clue as to how to transition from earning to no-earnings and a lot of anxiety trying to get my arms around that. Realistically, I know we are never gonna be poor, just need to convince my brain of that.

The anxiety remains, but I've learned much from y'all and now see that the anxiety is largely unfounded and just fear of taking the big leap.

P.S. Deep respect for all the folks who've figured out how to do this far more efficiently and earlier than me.

I think part of the problem is that no matter how high your net worth is, rather than feeling like some lofty extravagance, you get accustomed to it, and it feels "normal". You're only "rich" or "wealthy" in the eyes of those who are "poor". To yourself, you're just "you."

I'm still working, but admittedly, a bit guilty of forgetting how well off I am, as well. There's a line from "Newhart" that comes to my mind. Spoken by Jose Ferrer, father of the rich maid Stephanie. He said something like "Sometimes I forget just how wealthy I am, until I see it through the eyes of someone who is agog."

 

[Music Lover]

I sounded exactly like what you're describing, high income, high NW, expensive lifestyle, absolutely no clue as to how to transition from earning to no-earnings and a lot of anxiety trying to get my arms around that.....

P.S. Deep respect for all the folks who've figured out how to do this far more efficiently and earlier than me.

Many of us never had a high income in the first place, so from Day 1 we had to figure out how to live on less, and then how to retire on less.

 

[FLJim]

The folks on ER don't need advice from Dave Ramsey. But there are millions of people who can benefit from his help. Most schools do NOT teach 'personal finance' (or religion, or politics [?]) so people learn it from their broke friends and family. Ramsey's approach is basic, and relies on "small victories" to keep motivated. Financial head-knowledge is terribly lacking, and add in bad behavior, and you have a populace that wallows in debt. Ramsey offers a way out that has worked for those willing to work the plan.

 

[LateToFIRE]

I think part of the problem is that no matter how high your net worth is, rather than feeling like some lofty extravagance, you get accustomed to it, and it feels "normal". You're only "rich" or "wealthy" in the eyes of those who are "poor". To yourself, you're just "you."

I'm still working, but admittedly, a bit guilty of forgetting how well off I am, as well. There's a line from "Newhart" that comes to my mind. Spoken by Jose Ferrer, father of the rich maid Stephanie. He said something like "Sometimes I forget just how wealthy I am, until I see it through the eyes of someone who is agog."

What you're describing I've seen referred to as "hedonic adaptation". DW and I were just discussing this. She has friends from her artistic endeavors who have somewhat less than we do, and so she has a more nuanced sense of how privileged we are. Me, on the other hand, though I grew up kinda poor, that was a long time ago, and these days most of my friends and business associates are at least as well off, often orders of magnitude wealthier than us, so our situation feels like no big deal most of the time. That plus we live in areas full of extremely well off folks - I tend to "complain" that on our road [which includes families with wealth in the nine and ten digit realm] we're the trailer trash. Sometimes perspective is hard to come by.

 

[LateToFIRE]

Many of us never had a high income in the first place, so from Day 1 we had to figure out how to live on less, and then how to retire on less.

A lot of people in that situation never figure our how to "retire on less", it's certainly not a given, and something I hope you are very proud of accomplishing.

 

[Andre1969]

What you're describing I've seen referred to as "hedonic adaptation". DW and I were just discussing this. She has friends from her artistic endeavors who have somewhat less than we do, and so she has a more nuanced sense of how privileged we are. Me, on the other hand, though I grew up kinda poor, that was a long time ago, and these days most of my friends and business associates are at least as well off, often orders of magnitude wealthier than us, so our situation feels like no big deal most of the time. That plus we live in areas full of extremely well off folks - I tend to "complain" that on our road we're the trailer trash. Sometimes perspective is hard to come by.

Lol, I used to call it "Hedonistic Creep," but "Hedonic Adaptation" does sound a lot more tasteful I used to think of it in even minor instances, such as how the first time I had a car with power windows, or the first time I lived in a home with central a/c, or when we first got cable tv with a few movie channels, I felt "rich" for a little while. But then it just felt normal, and instead of feeling elevated somehow, I just started looking at crank car windows, window-shaker a/c units, and over-the-air tv as a step down.

The whole power car windows thing just gave me a funny flashback. Nobody in our immediate family had bought a car with power windows until the fall of 1984, when my grandparents bought a 1985 Buick LeSabre Limited that was probably about as fully-loaded as you could get (although no leather or sunroof). Over the summer of 1985, Granddad bought a new C-10 Silverado pickup, that, for a truck at the time, was pretty well-loaded, with power windows and such.

Well, the fall of 1986 comes around, and Mom bought a new, but leftover, Monte Carlo. When Granddad saw it had crank windows he joked "Oh, you got a CHEAP car!" He was just joking, and I remember thinking it was funny at the time, but ooh, was Mom STEAMED!

The 1985 model year seemed to really be the turning point for us, when it comes to power windows. My paternal grandparents bought a 1985 LTD, one of the small, Fairmont-based ones. First power-window car. It was followed by an '89 and '94 Taurus, both with power windows. With my maternal grandparents, that LeSabre and Silverado were the last vehicles they bought. And after that Monte Carlo, everything my Mom and stepdad bought from there on out had power windows.

It's funny how power windows are expected in just about everything these days, but once upon a time, they were a plaything for a rich. I don't think you could even get them in small cars until probably the mid 1970s. Chrysler never offered them in the compact Dart/Valiant as far as I know, so they probably started with the 1976 Aspen/Volare. I doubt any Ford Falcon or Maverick ever had power windows, although I'm sure when the Granada came out, it offered them from the get-go, as that was a "luxury" compact. And I doubt if Chevy offered them in the Chevy II/Nova at first, although once the Granada came out, they probably upped the ante and decided to offer them.

 

[Music Lover]

A lot of people in that situation never figure our how to "retire on less", it's certainly not a given, and something I hope you are very proud of accomplishing.

It never seemed like an accomplishment. I had a govt job and knew the exact day of retirement 30 years before it happened. So, I went with the mindset that on XX day I was retiring and therefore had (wanted) to be debt free and be able to live on my projected pension. I had 30 years to get ready, so it's not like I woke up one day suddenly surprised that it was time to retire and I couldn't afford to.

 

[Major Tom]

I think part of the problem is that no matter how high your net worth is, rather than feeling like some lofty extravagance, you get accustomed to it, and it feels "normal". You're only "rich" or "wealthy" in the eyes of those who are "poor". To yourself, you're just "you."

This is exactly it. My guess is that we have all experienced it in some way, regardless of our income level. With an annual spend of $27,600 including my rent (I don't own property), I don't think anyone could accuse me of having an extravagant lifestyle. Nevertheless, every now and again, I go on a bit of a spending spree and then later, have to take myself in hand, and consciously cut down on my spending. It would be all too easy to let my temporary "extravagances" become the new normal.

 

[Time2]

It never seemed like an accomplishment. I had a govt job and knew the exact day of retirement 30 years before it happened. So, I went with the mindset that on XX day I was retiring and therefore had (wanted) to be debt free and be able to live on my projected pension. I had 30 years to get ready, so it's not like I woke up one day suddenly surprised that it was time to retire and I couldn't afford to.

We just started saving when we got married in 81. I never thought much about retirement until reading MMM and then the 4% guide. That was 2014, I cut way back in 2016, but could not budge the wife. It took a hurricane,
(literally) to get her to retire. The hurricane destroyed our small business and did $90k of damage to our home. A disguised blessing

 

[Torrensl]

sorry, ignorant question follows: does the 4% withdrawal mean drawing down your portfolio (ie, if portfolio is 100,000, you withdraw 40,000 and spend it? but if you are just spending your dividends, but not drawing down the portfolio, is that a 0% withdrawal rate?

 

[GenXguy]

sorry, ignorant question follows: does the 4% withdrawal mean drawing down your portfolio (ie, if portfolio is 100,000, you withdraw 40,000 and spend it? but if you are just spending your dividends, but not drawing down the portfolio, is that a 0% withdrawal rate?

No. Dividends do count as drawdown.

 

[Time2]

sorry, ignorant question follows: does the 4% withdrawal mean drawing down your portfolio (ie, if portfolio is 100,000, you withdraw 40,000 and spend it? but if you are just spending your dividends, but not drawing down the portfolio, is that a 0% withdrawal rate?

4% of $1M = $40,000. You can withdraw 4% of you portfolio per year. It doesn't matter whether you take it in dividends, capital gains, IRAs or Roths.
Actually it does, a little, because of taxes, but that is the general idea.
The guide also allows you to raise your starting 4%, by the yearly inflation rate. 1st year $40,000, inflation 3% 2nd year, then $41,200 inflation 4% 3rd year, then $42,848.


Two studies about the 4% guide.


https://kyestates.com/wp-content/uploads/2015/02/Bengen1.pdf


https://www.researchgate.net/public...thdrawal_rates_from_your_retirement_portfolio


And I always add FireCalc. Spend some time with it. And learn what it is doing.

https://firecalc.com/

 

[ncbill]

Why do people 55 with a 3 million dollar nest egg, $60,000 emergency fund, expecting $4,000 a month in social security benefits, and a $5000 a month pension, with a paid off house, always calling his show asking if they have enough to retire off of?

Sounds more like a call to Suze Orman's show.

And she'd tell the above to keep working to age 70!

 

[jazz4cash]

The folks on ER don't need advice from Dave Ramsey. But there are millions of people who can benefit from his help.

Yeah I think we all get that. It’s when he drifts into investing and portfolio advice that many of us feel his advice is dangerous.

 

[Koolau]

Why do people 55 with a 3 million dollar nest egg, $60,000 emergency fund, expecting $4,000 a month in social security benefits, and a $5000 a month pension, with a paid off house, always calling his show asking if they have enough to retire off of?

Heh, heh, read the "Hi, I Am" Forum here at FIRE Forums.

 

[jkern]

My guess is that DR is choosing to ignore Sequence of Return Risk because it's too complex for his audience and they might turn his show off.

 

[FREE866]

My guess is that DR is choosing to ignore Sequence of Return Risk because it's too complex for his audience and they might turn his show off.

Thats a great point. He keeps his message really really simple....and that sells well.

 

[TickTock]

I have used the following as the definition of "rich" since hearing it from my 11th-grade English teacher: You are rich if you can quit your job tomorrow, never go back to paid employment, and maintain your current lifestyle throughout the rest of your life.

There you go. "Rich" is a different dollar number for each of us, but the result is the same. Blew my mind as a high-school student; still resonates with me today.

 

[disneysteve]

I have used the following as the definition of "rich" since hearing it from my 11th-grade English teacher: You are rich if you can quit your job tomorrow, never go back to paid employment, and maintain your current lifestyle throughout the rest of your life.

I think most here would call that financially independent which, to me at least, is not the same as rich.

 

[TickTock]

Rich, financially independent, whatever term is appropriate...

[I certainly have no problem with financially independent. Keep in mind that the quote is from the mid-80s; we weren't quite so financially sophisticated then. ]

 

[Koolau]

Yeah, good definition of FI but, RICH? That's someone who has 3 times what I have?

 

[harley]

sorry, ignorant question follows: does the 4% withdrawal mean drawing down your portfolio (ie, if portfolio is 100,000, you withdraw 40,000 and spend it? but if you are just spending your dividends, but not drawing down the portfolio, is that a 0% withdrawal rate?

The reason it doesn't make it a 0% withdrawal rate is that when the companies pay the dividends, the value of the stocks go down by the dividend amount. On day x the stock is worth (say) $100/share. If they pay a 2% dividend, on day x+1 the stock value becomes $98. So it's almost exactly the same (minor tax difference) as selling $2 worth of the stock. Thus, not a 0% WR.