This Is How Dave Ramsey Will Make You Poor

Imagine being able to pull $80,000 from your million-dollar portfolio forever without running out of money. Can you really withdraw 8% of your retirement portfolio every year without running out of money? Dave Ramsey says yes, but let me explain why he might be wrong. In this video, we'll dive into the concept of the 4% safe withdrawal rate and why it might be a better option for long-term financial stability. Don't miss out on this important financial advice - be sure to subscribe for more!
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[@JarradMorrow]

Check Out My Recommendations (It helps support the channel): 📝 NewRetirement - The retirement planning tool I personally use to make sure I'm on track with saving for retirement. It's perfect for "Do It Yourself" investors bit.ly/3EAAhrJ 🔥 M1 FINANCE Investing- Free $10 (once you deposit at least $100 within 30 days) bit.ly/427KBBn 📚 Here's a video on how to use M1 Finance kzbin.info/www/bejne/oXayhGCtZ5aIacU

[@super8mate]

Jarrad, can you do a review of New Retirement software please, mate?

[@aolsonx1]

I made the mistake of using one of Dave Ramsey's endorsed local providers when I first started investing. I was paying a 5.5% load, and on top of that the funds far underperformed the total stock market index fund. Thanks to the information I received from guys like Jarrad, I now do my own investing through Vanguard. Dave Ramsey is good for getting you out of debt but no one should follow his investing advice.

[@jackstar254]

Tough that you had to learn that the hard way. I'm all index funds and slowly buying real estate 1 at a time, no debt. Predicting 10 properties by 50 years old and 300k cash flow by then. Go slow, learn, and keep grinding.

[@Lonovavir]

His value is good, but limited. If you're financially literate he's optional.

[@DefinitelyNotRin]

This is basically what I say. Dave is good for debt practices and nothing more. Need to pick and choose your information.

[@mariahsmom9457]

Same here. His ELPs are not good. High fees and poor advice. Also in all indexing here., too.

[@MatthewStidham]

@@jackstar254 yeah, that stinks. Even his debt advice of focusing on balances is a great way to increase interest payments, and take a longer time to get out of debt. His "psychology" argument is voodoo.

[@x1928]

I don't understand why shouting with confidence is an assertion of being right for dudes like Ramsey

[@JarradMorrow]

Yea, I just don't understand his logic sometimes.

[@joseCalderon1976]

It's funny because when someone starts shouting, I just stop listening. Heck I've done that myself and I have adjusted accordingly 😂.

[@stt5v2002]

ITS JUST MATH OK. MATH!!!

[@joseCalderon1976]

@@stt5v2002 Hahaha. Yeah, Dave Ramsey Vacuum math

[@1stLtDavis]

You’re not supposed to question his Holiness, even though he clearly continues to receive much more than he gives, and he had benefits in his early life that I’m sure you did not, including parents that set you up at 18 and connections through them that allowed you to flip houses at 25 in the 1980s admittedly making six figures which might as will be $1 million back then. He was born/destined to be rich. Or at least as rich as we are talking.

[@aarontheblackfox]

Honestly, once you retire you should build your "emergency fund" up to 3-4 years expenses during good times so that when the market does decline you can just opt to not withdraw anything.

[@JarradMorrow]

Depends on how much you have in your investments and your lifetime horizon. 3-4 years would be a nice buffer but you do have to worry about cash drag in retirement. In retirement you still need your money to grow so holding too much of it could put someone in a tough spot. Definitely worth considering, but the only way to know is run the numbers when you're about to retire/in retirement.

[@whatsupwithsteve]

I am retired and think of my entire portfolio as an "emergency fund"!! Just figure out what you need to live comfortably on and keep the rest invested. Just don't go over 3.5-4% very often unless you don't care if you have anything to leave to your heirs......or your dogs..:)

[@JKinLVN]

Aaron - I agree. Although 3-4 years is not fool proof, but it's a good rule of thumb and should suffice for most people under most circumstances. Let's face it...there isn't a 100% fool proof plan and each situation is different. Ramsey is more right than wrong, in terms is what likely will happen. Ramsey's biggest issue isn't his 8% rule. Ramsey's biggest issue is his stubborness to say that one size fits all...and insinuating that a market correction won't last.

[@masmith1111]

After having heard so many rants from Dave about putting a few groceries on a credit card, I was quite shocked to hear his advice to throw all caution to the wind, assume a 12% return rate in perpetuity, and take out all the rest, in particular with such large sums of money. It sounds like Dr Jekyll has now started advising Mr Hyde...

[@leborhal7450]

Something to understand about Dave Ramsey's product and strategies - which honestly helped me get started on my own personal finance education. Its genuinely, and earnestly, targeted at people with low financial intelligence and heaps of debt, to arm them with better financial decision making in the immediate so they can be setup for better returns later on. Almost none of his target audience will be in a position of having a million dollar portfolio, but they can shoot for being debt free, owning a home, and not having financial problems plague their lives. I agree a lot of his quick math's don't calculate in all of the nuance, bad years, predictive short fallings, etc, but that is irrelevant to people on 60k dollar teaching salaries with 200k dollars in debt. Love your content Jarrad

[@Nigriff]

It's like AA for people with a spending problem

[@JeremySharpSMSG]

U replied perfectly. It goes over people's heads what the show really is

[@kriskafowlski4463]

Thanks Jarrad. Great explanation. I agree 12% assumption is nuts!

[@hopefilledfinancial]

Great Video! I love that you mention how models change and we need to monitor how models are changing and update our plans accordingly. Hopefully, we can change Dave's mind on this topic.

[@GG-eu1nu]

The main reason of why he is yelling is that the 4% rule does not conform to his baby steps. In other words, people will chose to -rightly- invest more than paying off the mortgage to get to their number. So if the baby-step sequence is not really correct, then his sales are going down….plain and simple…(people will chose a different approach)

[@jorgeosorio1242]

you are amazing thank you so much for the great advise !

[@JarradMorrow]

Happy to help!

[@RobinTaylorMusic]

"The real world is not a spreadsheet" so true

[@lmelior]

I'm loving all the reactions from personal finance channels all over youtube. That clip is just wild, especially because what set him off was basically Dave 2.0, George Kamel! More than any other personality, George bought wholeheartedly into the Ramsey Plan. He does everything by the book, follows every rule to a T, and that's the advice he gives as a cohost, too. Even Dave waffles back-and-forth every once in a while with certain edge cases, but not George! He is the personification of the Baby Steps themselves. Really it looked like Dave was grooming George to take over the whole enterprise at some point, but now... Finally I think I see how many people get so invested in drama surrounding celebrities or reality shows. I can't wait to see what George has to say and what's gonna happen next!

[@vragini]

it is a family business - unless George is family Dave will never leave anything to him. that is not how it works. Dave Ramsey is getting senile and is too rich to worry about these middle class problems going forward - he is basically out of touch at this point

[@gferrigno]

It is too easy to quickly jump on Dave for his SWR advise... but I will put out a challenge to find a different way to look at this. For example, I was over $100K in debt when I first heard of Dave and decided to get gazelle focused to get out of debt... Many people told me how terrible his advise was because I stopped 401K contributions and did not pay the 'highest' interest rate loans first, etc... but guess what? It still worked for me. I am happy to report that today I have a nest egg that even if taking out 8% yearly might make it such that I run out of money, I am thankful for the advise that allowed it to be accumulated in the first place.

[@Nigriff]

I think the main thing is to be focus on spending more than you make and creating a budget. That is the take home message over and over in a world where we are taught to be in constant debt.

[@urbanvegsa1928]

Please do a video on the retirement software!!!!!

[@JosephSimon_]

Great content man

[@JarradMorrow]

Appreciate it!

[@sum1typing]

I'm not sure where to appropriately post this question. I've watched a handful of your videos and a lot of it seems to cover tax advantaged accounts but not how to invest taxable accounts. Unless your approaches apply to both. (I'm very new to investing) I'm stuck with a chunk of change that I can't put into tax advantaged accounts. I planned to just put it into ETF's using the 3 fund portfolio strategy, because I heard somewhere else that target funds should only be used in a retirement account. Is there a better plan I should exploring?

[@JarradMorrow]

The general buy and hold approach applies to both types of accounts. The main thing to understand is the tax liability that comes with different ETFs you hold within a taxable account. I agree you shouldn't hold a TDF in a taxable account (example linked below). I would also caution against holding bond funds and dividend specific funds within a taxable account due to the higher taxable distributions paid out. A 2 fund portfolio (total u.s.stock ETF or S&P 500 ETF and international ETF) is perfect for a taxable investment account. If you want to add a bond to your holdings to build a 3 fund portfolio then just put that fund in a tax advantaged account if you can. Here's a good write up on Tax-efficient fund placement to learn more www.bogleheads.org/wiki/Tax-efficient_fund_placement#Assigning_asset_classes_to_different_accounts Here's a real life example of how people got screwed by holding a TDF in a taxable account www.cnbc.com/2022/03/15/vanguard-created-big-tax-bills-for-target-date-fund-investors-lawsuit-claims.html

[@BryceMatheson]

Love this. Great video. Didn't know Dave was preaching an 8% SWR. I've considered using a 6% SWR for early retirement, but basically because I know I'm always going to get bored and will be bringing in supplemental income of some sort. Thanks Jarrad!

[@dominiquez5643]

You are amazing Jarred, notch it down several revolutions and you'll be golden! I have trouble follwoing you because you go so fast jumping from one thing to another....humbly from anew "iunvestore wanna be" followeer! You are the only serious channel I follow, except from Dave Ramsey and now I have my doubts. You need to get deepr into this, but explaining to 5 year old children please....

[@minsubsong5578]

Irrelevant.but my company is changing the insurance so now I’m forced to use Navia HSA. Has anyone used it before?

[@alex182618]

A social security statement says that SSA will cover 45% of expenses in retirement. IRS allows to invest $6500 a year in an IRA account. Obviously the government has calculated that by doing so for 20-30 years a retiree will have just enough money to cover 55% of the expenses in retirement. I made my own calculations and I confirm it. That is it. A retiree needs both: SSA and IRA. Now, Dave R keeps insisting that without SSA, a retiree would be in a better place. That is why he made up 12% return in his mind to talk himself into this anti-government-run-pension-fund ideology.

[@johnny_blades]

Even Dave's Smartvestor Pro advisors don't agree with the 8% withdrawal rate. 🤣

[@Nigriff]

Neither does Dave 2.0 Boy Wonder George Kamel.

[@1stLtDavis]

One reason for Dave’s advice growing more and more inadequate, and quite literally out of date, is because it’s predicated on the “magic moment” economy of 1945 -1995. when the boomers were younger, and when global trade was devised by America for its own security during the Cold War. Dave grew up in the magic moment, which did not proceed him by much, and it is not looking to succeed him either. The unusual, magic moment from the 1940s through the 1990s has been an aberration, and it’s already been unwinding since the 2000s. The particular trade order, which had nothing to do with making money for America, and more to do with security during the Cold War, as well as the aging boomers, whose kids are somewhat less numerous, and with fewer good earning opportunities relative to the big ticket items, such as buying a house.

[@jacklee5806]

I’m a big Dave fan but this content is very thorough and makes a lot of sense!! Like you said the key is to be able to adjust your spending with how the market is performing.

[@stt5v2002]

Be sure to learn finance from some other sources too. Dave Ramsey is the financial equivalent of that football viewer who keeps saying things like "the average run gain is 3 yards! They should just run on all four downs for the entire game, its an unbeatable strategy!" It might seem superficially accurate and even mathematically sound when you don't understand how an average works. But the situation is far more complex than this. Dave is good on some general concepts like "taking out high interest credit card debt to buy stupid stuff you don't need is a bad idea." But when he starts trying to calculate something, it's big red flag.

[@ronmexico5908]

I'd say take 4% but put the dividend in a separate account. When the market performs less than 10% just spend the dividends and take from the separate dividend account if you need a little more but not 4% in down years

[@mattball2700]

I wouldn't say "WORST" advice. Killing hope is a good point. But yeah - Streamline Financial did an example with actual return where the person ran out of money.

[@JeanPierre-yt5up]

Hi Jared😀😀 , I'm a BIG fan of yours! Please tell me how I would invest 1,100,000 .I was going to lump sum 500k and DCA 20k each month for 30 months in S&P 500 . Can you PLEASE give me advice? Thank you very much!

[@timreierson26]

More and more people are calling out Ramsey these days. I put him in the same category as Jim Cramer - someone whose advice I would never follow.

[@Nigriff]

The main message is to make more than you spend, which is sound advice in a world where 99% are telling you take on more and more debt

[@BerCanUSA]

Here is a question? Would it make sense to have two retirement savings accounts - one for down market years and another for when the market is performing well? If possible have 3 - 5 years of savings in one pot while the other has the bulk of your retirement savings in it. You don’t draw for the large pot in the down years.

[@gferrigno]

makes sense... a lot like barbell strategy... and you don't have to have two different accounts... it can be achieved with just one account

[@mandypdx]

I have a 401a, Roth 403b, Roth 457b, and a Roth IRA (and a brokerage account)

[@davidwinebrennerjr4196]

$500k in ICA with front load 2% taking out 8% of year end value over rolling 25 year periods back to 1934 inception had exactly one period where the value after 25 years was slightly less than $500k 1/1/98 to 1/1/23. $855k in withdrawals and $400k left. Hmm

[@shalliangregory7579]

Hello, I am a beginners I have a Roth IRA with fidelity I have 90% in S&P 500, 10% treasury bond. I have $1500 in my roth now What percentage should i allocate In FSKAX, FTIHX & FXNAX

[@JarradMorrow]

I have a video where I break down my thoughts on asset allocation which might help you decide: kzbin.info/www/bejne/mX_Zooipr7VrgNE

[@D_Spear]

I was listening to his podcast live when he said this and there was just no way the math made any sense. Sometimes Dave’s quick math is not the real world.

[@moneycessity]

Sequence of return risk is a beast...

[@JarradMorrow]

It's something I wish more people understood.

[@stt5v2002]

Excellent Dave Ramsey financial advice: "Don't build up $37,000 in credit card debt at 22% interest while minimally employed at a dead end minimum wage job." Pretty good Dave Ramsey financial advice: "Rather than buying transiently fun stuff right now, save your money for retirement." Generally poor but occasionally useful Dave Ramsey financial advice: "You can reliably make a 12% annual return." Very bad Dave Ramsey financial advice: "Student loans for college education are not a good idea." Laughably absurd and embarrassingly out of touch Dave Ramsey Financial advice: "Buy a house with cash."

[@MusicalXena]

Love this comment. It helps explain why some people are in the Dave Ramsey camp and others are not. Life is nuanced and things change over time, but Dave gives a lot of "absolute" advice. Some of that advice holds up over time, over parts, not so much.

[@Nigriff]

He's not against college, he's against going into a debt of hundreds of thousands of dollars for a useless degree. Look at how many people spend $200k for a degree in something they never use. Not a good investment. About cash for houses, that's what he recommends for only investment property, otherwise, he recommends 10-20% down on your house of residence and a 15 year fixed rate loan. That's solid advice. If you can't pay cash for an investment property, you probably shouldn't be buying it. He learned the hard way, as do millions of other people who think they're going to leverage debt and become multimillionaires and then end up go8ng bankrupt.

[@ryen7512]

My idea is use 6%, but each year only use 6% of the portfolio you have left in that year. That will ensure you never run out of $ even though your distribution amount could go down over time.

[@aolsonx1]

I like that plan. The 4% rule assumes there is no flexibility in your budget. If you are willing to cut back when the stock market is down, you can definitely spend a little more when it is up.

[@andrewdiamond2697]

0:10 Dave's daughter looks like she's cringing. BTW, my return expectation is 8% on inflation of 4%, Safe withdrawal rate of 4-5%

[@JarradMorrow]

You can’t reason someone out of an opinion they didn’t reason themselves into. She started to try, but she knows it would be pointless.

[@TampaFloRaider]

It's the future. So who really knows. Dave's has me on track for $2.5M. $200k a year is way more than I spend now. So I think I'll be good.

[@tomiasthexder7673]

Dave never factors in risk when it doesn’t suit his argument.

[@sandybeach3576]

Dave Scamsey gives out dangerous advice.😅

[@OnCashFlow]

I think it is pretty irresponsible of him to say that. As "Financial Media" he is not held to the same standard as someone giving paid personal financial advice, His primary audience is beginners, especially higher income beginners with little to no financial knowledge, but I think that 12% returns and 8% withdrawals is stretching reality and could create a false target for a lot of people.

[@OscarCastillo-fl9dw]

More like 6 % average lifetime 12 is crazy 😅

[@justinh.2778]

Waiting for @DaveRamsey to comment on this.

[@mariahsmom9457]

Ben felix has done an excellent video on an even lower safe withdrawal rate. And he did a reaction to daves crazy video. Bens channel is very smart! Dave got roasted all over the place on that video.

[@Firepowered]

Ramsey is the ultimate boomer. He's got good advice for getting out of debt (which is a problem boomers historically have) but not so much for investing.

[@amireallythatgrumpy6508]

It's a problem Americans of ALL generations have, not just boomers.

[@PityDaFool]

The term for this is negative compounding. I love Dave but his investing advice leaves a lot to be desired.

[@ThatLazyInvestor]

I agree that advice is terrible. Also, looking good Jarrad 💪🏻

[@aaront936]

Hes told people to even take 10% out for a California couple.

[@JarradMorrow]

😂 didn’t know that. Wow

[@AshknFX]

With dave's advice u will be rich when u have 2 years left b4 going underground

[@MrTmenzo]

Nein. According to his advice as soon as you're debt free you can start saving for retirement. It's up to you how soon you want to be debt free.

[@AshknFX]

@@MrTmenzo yea good advice but it's very basic. I'm already debt free since 2020 maybe. After getting a divorce :)

[@amireallythatgrumpy6508]

Well most people will never be rich, so....

[@AshknFX]

@amireallythatgrumpy6508 still people with good income wont be rich with his methods. But they can otherwise

[@bluegillmich]

Good thing the average person lives 18 years after retirement, i'm planning for 20 (LOL)

[@AustinMathias]

Go ahead and withdraw 8% of your portfolio in retirement. If you only expect to be alive for a few more years!

[@gameplayer1980]

I love how DR's tirade has created so much video fodder for the culture.

[@whatsupwithsteve]

This is way too important to think of trotting out advice that could destroy a person's life. If I took ol Dave's advice at 65 I would be broke by my early 80's....then what? Dave doesn't care but I would. I'd be too old to even be a WalMart greeter!

[@amireallythatgrumpy6508]

If you actually took his advice you wouldn't retire until your early 80s though

[@dmsoundcollective6746]

Lol ! The internet is blowing up with the comments that Dave made I can't believe someone so influential Would out of his ass like this. I'm sure he's getting a lot of views though that's probably making him happy

[@Traxxis03]

Dave is great at selling books though...

[@xlavahott4547]

Dave is getting everything he wanted... Free publicity by telling people what they wanted to hear

[@jmorris023]

Ramsey's "math" is the math of a child.

[@mj1961christian]

I totally lost respect for him over his ranting and name calling. Not the kind of person I want to listen to for financial advice.

[@ThurstonConsulting]

Rather than withdrawing X%, why not generate x% in dividends and withdraw that. This leaves your original investment intact. Also dividends can be taxed at the long term capital gains rate which currently can be zero for those married filing joint and dividend income below ~$83K.

[@JarradMorrow]

Dividends aren’t free money. Whether you sell off shares or take dividends, your original investment does not stay intact either way

[@camc8923]

Most of Ramey's advice is poor. Hes about as good as Cramer

[@faustinreeder1075]

Worth $350 million so….

[@oldscratch3535]

@@faustinreeder1075 Yeah...through physical real estate. Not investing in the stock market.

[@amireallythatgrumpy6508]

Closer to double that.@@faustinreeder1075

[@TheSmartLawyer]

Ramsey is wrong at least as much as he is right. Recklessness = Ramsey

[@johnnycircus7463]

Well, Ramsey is a complete fossil who won’t live long enough to see how bad his ideas are, so he’ll just keep dispensing them. #goawayboomer

[@kckuc310]

Dave must have medical condition, he is clearly wrong and acting like a teenager when you catch them in a lie.could you imagine taking 8 percent out when the market is down 40 percent

[@blinddog4288]

I’m planning on a 6% withdrawal rate.

[@amireallythatgrumpy6508]

I'm planning on a 1% withdrawal rate