Ramsey made me think twice... $3.5M PF earning 100k/yr...

mikes425 said:
Not a Dave Ramsay fan for a few reasons but randomly stumbled on a recent segment from his show that resonated with me.


I think i'm ok in any event...this just made me question what backs up his slam-dunk certainty of 10% a year...and that anything less than 5%/year in an all-growth fund PF is a foolish expectation.
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Very good that you're not a fan when it comes to his investing ideas.

To answer your question in bold: nothing. Which is why he should be ignored.
 
Not sure how you're invested but I'm assuming pretty conservative if you're getting around 3% dividend yield. If you took 80% of those dividends and reinvested the remaining along with your $34k of social security you could easily generate $115,000 +/- of income a year and in almost every scenario your portfolio should continue to grow in value. Again, assuming a conservative allocation somewhere around 60/40 with a value tilt which I'm also assuming considering your dividend yield.

Nice to see a fellow nw Pa poster around.
 
As stated above you are good to go with a 3- 4% withdrawal rate and pull down $105,000 to $140,000. Add on that $34K of SS and you are doing $174,000 a year. You could consider tweaking your portfolio a bit and increasing your dividend yield. That depends on your comfort level. But there are a few folks here that add in some bigger dividend holdings for extra income.
 
The new 4% rule is 4.7%. At age 68, I'd round up vs down, personally. Don't know if you feel like you're gonna live to 80 or 100, but I don't see too many folks really active after 70-75. DW just told me last night some big wig she does biz with found he has terminal brain cancer and has 1-5 years @age 55.

I take note of the high profile deaths and their age as they likely have better access to HC. Rare to see over 80 years for most.
 
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Surewhitey said:
The new 4% rule is 4.7%. At age 68, I'd round up vs down, personally. Don't know if you feel like you're gonna live to 80 or 100, but I don't don't see too many folks really active after 70-75. DW just told me last night some big wig she does biz with found he has terminal brain cancer and has 1-5 years @age 55.

I take note of the high profile deaths and their age as they likely have better access to HC. Rare to see over 80 years for most.
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Katherine Ohara-71
 
Surewhitey said:
The new 4% rule is 4.7%. At age 68, I'd round up vs down, personally. Don't know if you feel like you're gonna live to 80 or 100, but I don't don't see too many folks really active after 70-75. DW just told me last night some big wig she does biz with found he has terminal brain cancer and has 1-5 years @age 55.

I take note of the high profile deaths and their age as they likely have better access to HC. Rare to see over 80 years for most.
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The go go, go slow, no go years. I have seen it many times. Time waits for no one.
 
mikes425 said:
Not a Dave Ramsay fan for a few reasons but randomly stumbled on a recent segment from his show that resonated with me.u

A guest called in my age range- mid 60s - states he has 3.5M in assets - still works - and questioning whether he can retire. The guy claimed his work income at 170k/year.
Dave's bottom line is, with those assets, he should 'easily 'be earning 350k/year off the PF alone. Double his work income, doing nothing so, no-brainer. Retire.
Dave casually suggests being mostly invested in 'growth mutual funds' to get that return and that "rarely has the market ever" seen under 5% return. "Maybe 2 years.."

I'm sitting at about 3.5M, age 68 next month. Still working and self-employed but
not pulling in an attorney's salary - more like 40k as a freelancer. Could be 100k+
but i don't want to work that much anymore.

Dividend income generated by my 50/50 AA PF ranges about $105-110k a year in the last few years. I still work some because i can take it or leave it and not stress about it. I also feel less stress having an allocation that's moderate, not all-in on growth funds - which apparently is way conservative in Dave's eyes, with his kind of presumptuous smug assurance that the dude is gonna make 350k/year off a 3.5M
PF and that's that.

I don't feel like tolerating a lot more risk..which to me, his default-recommendation assumes.
My question being...is 100k/year with a 3.5M/year PF overly protective. Should i consider a slightly more aggressive position. I'm not extravagant, COLA is low...
I own my modest 250k house, have no debt. I'll get an SS income of 34k/year if i take it this year, maybe 40k at 70 FWIW. My inclination is take it this year and invest most of it.

I think i'm ok in any event...this just made me question what backs up his slam-dunk certainty of 10% a year...and that anything less than 5%/year in an all-growth fund PF is a foolish expectation.
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How about as you age and your personal inflation goes up just tweak your portfolio to match. This delays spend down.

Or.

I have a set aside (about 1/3 of PV) in VTI and use the dividends for small tweaks but it’s there for cap gains if needed. It’s supposed to be used for later life issues in our case. This lets me hold less cash as a side benefit.

One mil should throw off about 10k plus in dividends.

Buffet recommends 90% VOO and the rest cash. I can see this as a viable portfolio though. Like you I can’t sleep well without backup to my backups…

As far as SS I’d wait for the max, just a couple of years. You never know what the future holds. I waited to get near the household max. SS raises pay the increasing medical premiums and fees etc. So another concern for me is eliminated. It will continue to be our greatest expense. At 40k for you that should be 800+ per year and up partially tax free.
 
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HarveyS said:
Yes, you can retire. Yes, as mentioned, you already are most of the way there.
50/50 is very conservative, but you should do what you are comfortable with. I hope you are maximizing the return on the 50% that is not equity.
I'm a big Ramsey fan, by my issue with Ramsey is that he says you can earn 10% on your net worth. I disagree if home value is (correctly) included in net worth. Now, if he based that on investable assets - I have no problem with a 10% return assumption. I've done better than that over the last 12 years.
Oh yeah, it's 10% per year on average. There will be up years and down years.
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I think the other 50% is for safety, not for producing the maximum return. If he wanted maximum return, he wouldn't be 50/50. Treasury bills or short term Treasury funds would fit the bill for safety.
 
Aerides said:
Most here would not sign on to retire depending on a 5% swr. More common is 3 or under, though that's conservative. We retired planning for about 3.5, but after 9 years we're closer to 2 just because of portfolio growth far exceeding our spending spread.

OP retire when you want, you have more than enough.
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5% Withdrawal in the go go years is not excessive as long as guardrails
are in place.
 
OP with thanks for the helpful perspectives! And sorry for the
shorthand for PF(portfolio). Bad habit picked up from a financial forum. Too many slang acronyms in the world.(TMSA😏).
 
Run you asset base and your other sources of income through FileCalc and see what it says is the most you can withdraw yearly and keep your success level at 100%.

Then run it through a few Monte-Carlo calculators and see what they say.

I did the above and it worked for me. YMMV.
 
Relying on a long term average in the short term could led to bad consequences.

Given your age, I think you can withdraw more than the 4%. I would probably also say that 50/50 allocation is fine if that meets your risk tolerance. Yes you can increase returns if you have higher equities, and as long as you monitor the investments, you have the fixed side to withdraw from when equities are down, or equities when they are up. In effect you rebalance some of your allocation by withdrawals. There have been several studies that show the difference from 70/30 to 30/70 is not much in the long term. So 50/50 is fine, but I also am a higher risk tolerance person and would run more equities if you are comfortable.
 
VanWinkle said:
I think the other 50% is for safety, not for producing the maximum return. If he wanted maximum return, he wouldn't be 50/50. Treasury bills or short term Treasury funds would fit the bill for safety.
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Unfortunately, I don't know what 50/50 means. I assumed 50% equity, 50% cash. Within the safety margin he wants, maximize the 50% cash. That is, MMK vs. savings account, for example. Then, get the best MMK.
 
HarveyS said:
Unfortunately, I don't know what 50/50 means. I assumed 50% equity, 50% cash. Within the safety margin he wants, maximize the 50% cash. That is, MMK vs. savings account, for example. Then, get the best MMK.
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50/50 generally means 50% equity/50% fixed income. Fixed income could be a combination of bonds, CDs, fixed annuities, money markets, and/or cash. Almost noone will have all of a 50% fixed position in cash. Cash is more likely to be 10-20%.
 
I heard about Ramsey making this 10% withdrawal rate argument a while back. The only thing I can figure is he is suffering cognitive decline. He once was a folksy guy who gave common sense financial advice. He’s turned into an angry cultural figure who sometimes says ridiculous things.
 
mikes425 said:
Appreciate all the replies here. As to my spending...it'll probably start being more about travel and leisure stuff but averaging an annual spend amount in the realm of 45-50k.

SS would essentially cover most basic living expenses/cash flow without having to touch principal so maybe "psychologically" i'll feel more at ease about $$ for luxuries hobbies or whatever add'l cost of lifestyle 'enhancements' once i start taking that.

And that said, i'd like to see more cap appreciation for the portfolio but i guess...who wouldn't ;)
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If you put your numbers in Firecalc, I am 100% certain you will get a 100% success rate with much room to spare tp spend more.
From past posts, you appear to be the nervous type financially speaking. I would retire now and not give it a second thought. You can maintain a conservative AA, to prevent any sleepless nights when the market does drop again.

How many posts have you seen here, where the statement in hindsight is that they should have worked longer vs they should have retired earlier. You might be saying the latter soon enough.
 
Surewhitey said:
The new 4% rule is 4.7%. At age 68, I'd round up vs down, personally. Don't know if you feel like you're gonna live to 80 or 100, but I don't see too many folks really active after 70-75. DW just told me last night some big wig she does biz with found he has terminal brain cancer and has 1-5 years @age 55.

I take note of the high profile deaths and their age as they likely have better access to HC. Rare to see over 80 years for most.
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Technically a 4.7% WR with a much more diversified portfolio than his original 4% WR, if one wishes to diversify more so.
 
why can't you spend more than 4%? at that age in mid 60s. Are you trying to preserve principal? Now 10% is a bit much but well i don't think 5-6% would be terrifying. I guess it depends on most people.
 
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