Dave Ramsey’s Retirement Planning Advice Is Flawed: Here is How
Jason 0 Comments Retire Wealthy Retirement Planning Tips for Retiree's
Dave Ramsey is fantastic if you are needing some
simple financial help to get out of debt maybe you've been irresponsible with your money you've
racked up toxic Consumer Debt and you're looking to implement some basic strategies to eliminate
that debt and to create new habits for yourself when it comes to your money Dave has impacted
millions of people when it comes to getting out of debt when it comes to understanding money on a
very basic level uh in a better way the challenge is what has happened is Dave has helped millions
of people get out of debt and in that process he's built a lot of trust up with that people and so
then therefore they start listening to him for retirement advice for planning for the retirement
future and in this video what I'm going to do is I'm going to cover the flaw the major flaw that
is in Dave Ramsey's retirement strategies I'm not gonna argue whether he's right or wrong
about returns but I am going to point out the massive flaw that most people are missing that
he never talks about can't wait to get into it if you haven't already make sure you subscribe and
hit the Bell that way you're notified every time I launch a new video Let's Go hey what's going
on cash flow hackers it's Chris with life 180. if you've been watching this channel a while you
know how I feel about Dave Ramsey um but I want to kind of take the conversation about Dave to
a little bit of a different level in this video um here's the deal Dave is really good when it
helps you when it comes to helping you get out of debt but his advice on retirement planning
is is absolutely in my opinion atrocious one of the biggest challenges that I have about Dave and
his strategies is that he's been singing the same song for 30 years right he has not changed his
philosophies his strategies he hasn't really even changed the numbers that he uses when it comes to
retirement planning and the expectations that you should have around your entire your retirement
planning even though the economic environment has changed metamorphically right so if you
understand that there are variables that impact your money and impact what you can expect in
retirement you have to understand that there are no simple rules that Dave tries to tell you like
Dave tries to tell you to follow to execute now I will say um that you know the advice Dave gives
is like it's better than nothing like that I will say it's better than doing nothing and it's better
than what most people do but I also believe that it's it's a problem that if you follow his advice
expecting a certain result and then you get to the end of the rainbow and there's no pot of gold and
you're actually not anywhere near you where you thought you'd be that's going to be a problem once
again we're not talking about the debt elimination stuff we're talking about which by the way is a
phenomenal thing to understand that and get out of debt like so from that perspective I applaud
him now moving forward when we're talking about wealth creation that's where he falls down when
it comes to retirement planning what I did is I built a spreadsheet because I think numbers say
a million words spreadsheet you know we can go through this and what I'm going to do is I'm going
to share this so here's what I wanted to do here I wanted to take a look at a household income
of about a hundred thousand dollars in today's money I want to save 15 of that income annually
I'm going to assume an expected return of 10 per year okay so what this does is like Dave is going
to sit here and talk about the fact that you need to save money based on retirement you need to to
Target retirement account values based on your hundred thousand dollars a year of income the
challenge is Dave doesn't take into this into account when he's ever talking about it I don't
know why either I don't know why if he if he thinks people just aren't smart enough to figure
it out but to me this is just basic Financial stuff that you need to know the understanding
of you need to understand to be able to make an educated decision if you don't understand how in
inflation impacts your financial needs long term you're never going to be able to make a good
financial decision and especially that we're in this environment right now where inflation is
4.9 percent last year it was over nine percent long term since 1971 inflation has been over
four percent actually nearing four and a half percent so like from that perspective looking at
it from a long-term historical average this 4.9 inflation environment that we're in right now that
everybody's freaking out about is not even high it's just a little bit above average now a lot of
people would argue that inflation is actually way worse than what we're talking about right now
because the actual impact on the calculation of inflation uh the the impact is is much greater and
worse on individual households uh than what the calculation says because they've actually changed
the calculation over the past 40 years on how they determine the inflation numbers which to me is
Criminal on its own but here's the deal we have uh we have the hundred thousand dollars of income so
what I have over here is I have um the retirement account balance needed to live with a four percent
rule so if you don't know what the four percent rule is it's the rule of thumb that says you can
distribute four percent of your retirement account value and not run a significant risk of running
out of money during your lifetime so that is like the safe distribution calculation expectation so
what this is showing is that if you had a hundred thousand dollars of income you need 2.6 million
dollars um actually it's a hundred four thousand I didn't do it for year one if you get to year two
and um you know your real need on four percent inflation is going to be a hundred four thousand
because your cost of living with inflation going up it means you're going to need more money
it needs your hundred four thousand dollars next year with four percent inflation is gonna
feel like a hundred thousand dollars of income Fields today the challenge is household income
historically is only going up in about three percent so it's lagging actual inflation and this
is why the middle class and the poor are getting poor and there's this growing divide between the
wealthy and the middle class it's not so much other economic policies even though that has a
play with it long-term inflation is the greatest tax that is hidden to the American population and
it has a hugely negative impact uh on the middle class and lower class the most right so ultimately
this column is what I would call your freedom number your freedom number is simply the amount
of money that you need in an account to be able to retire to be able to be completely financially
free and so right now use using traditional four percent rule methodology and now I'm not taking
into account Social Security or pension or anything of that nature so if in fact you did
have a pension if in fact you want to lean on social security for any reason you'd have to look
at your calculation and reduce those off of this number and then you divide that by four percent
and that will give you uh this number so if you said let's say you had fifty four thousand dollars
of pension and social security you'd subtract that out that'd be fifty thousand divided by uh divided
by the uh four percent and that would get you what your uh Freedom number would be it would tell you
how much money you need in that account to be able to kick off passive income for you for the rest
of your life now here's the challenge as I said household income is only going up at three percent
and Dave is saying hey you need to save 15 even if we earn 10 which is by the way wildly unrealistic
right I'm showing this at at 10 and it shows you at 6.561 million here but really that's because
of the fact that it's assuming that you're going to have a 281 thousand dollar uh need for annual
income now here's the deal your income is going up at three percent per year that 283 35 years
from now because I'm assuming it's a 35 year old retiring at 65.
Dave doesn't talk about the fact
that if you earn 100 Grand right now you're going to need 281 to be able to maintain your standard
of living that's not 281 000 in today's money that's 281 000 in future money right I just did
a video the other day talking about uh inflation and the inflation crisis and ultimately how that's
going to impact you um and and how that's like the history of this inflation and and where it looks
what it looks like moving forward into the future um but this 281 by the way is assuming only
a three percent increase at a four percent historical average of inflation if we look at
it that way you're going to actually need 394 000 and if you back that out you're going to need
9 million 865 000 and the problem is all of your Social Security cost of living adjustments cost
of living increases they don't keep up with the actual rate of inflation so the need for you
to take more responsibility for your retirement planning is becoming greater and greater and
greater and as as inflation keeps going up this is a way if you think about it from a social security
perspective this is a way that the government's able to kind of save Social Security if they
can inflate the currency of four percent and devalue the currency but then only give you cost
of living adjustments at two percent that means they're recapturing that money and saving the
program simply by the way they're doing that but ultimately they're stealing that money from you
through a hidden tax the problem is Dave doesn't talk about all this and what he does is he talks
about your need for this money he talks about saving a million dollars and I got news for you
you could save three million dollars and if you get to uh retirement and you have three million
dollars but you need to live on 281 000 a year you are going to be up the creek without a paddle
you're not going to be prepared and you're not going to be in a position um you know ultimately
where you're you know going to be able to uh have a a solid situation you know that's that's
really what it comes down to you're not going to have any kind of predictable income you're not
going to have any stability uh you know and you're ultimately going to have a lot of risk especially
when it comes to Market risk sequence of return risk and and just Market volatility risk when
it comes to your retirement if you if you follow his plan you're going to be under saved when it
comes to retirement simply because you didn't give enough credibility to the impact that inflation
is going to have on your future needs because think about it this way everything I just showed
you was a 10 assumption I could show you a lot of ways that 10 is completely unrealistic especially
when you talk about actual real returns I would say six to eight percent is is the more realistic
expectation and even then there's some risk involved right so if we if we back that out what
what that would look like at even eight percent which is I think the more I guess traditional
method that most financial advisors would say you could get from a long-term perspective if
you look at eight percent you're only going to have just over four million dollars that's about
at retirement 35 years from now for a 30 year old right when you hit 65 so in that scenario you're
still looking at only accumulating about half of the money that you're going to need just to
maintain your standard of living I don't care how much you have in Social Security or pension
it's probably not going to make up that Gap and you're going to have to take a reduction in
standard of living even if you follow his advice and have no car payment and have no mortgage or
anything like that it that that doesn't matter that that's not gonna make up for the Gap that in
inflation has caused for a problem for you and so that's something that you need to consider so my
encouragement to you is to go through your plan figure out what inflation is going to do to your
retirement planning needs and if you want help with this I've got a team I've got a certified
financial planner on the team that's happy to walk through this give you a consultation walk through
your needs walk through your current plan and and give you an analysis and an evaluation on what you
need to do moving forward to reach your goals on a predictable basis one of the things I always
ask I always ask people four questions first and foremost doing what you're currently doing do you
know what rate of return your money needs to earn to be able to retire when you want and guarantee
your standard of living for the rest of your life if you don't know the answer to that question then
everything else is going to blow up you can't plan accordingly if you don't know the answer to
that question second question is if you if you don't know that number the question is do you know
how much more money you have to save to be able to retire at your desired standard of living and
be able to retire when you want and if you don't know the answer to that which most people don't
I've literally met one person in my life that actually knew those numbers ahead of time then
you start backing it out and go okay how much longer are you going to have to work if you get
to retirement age and you haven't met that and you still need to work well a lot of people they have
to work an extra decade just to make it make ends meet right people are thinking they're going to be
able to retire at 65 but they have to work till 75 or 77 or 78 it's it's really just a sad situation
but then the challenges our health a lot of times sometimes sadly unfortunately fails on us we don't
when you hit 65 there's no there's no promises there's no guarantees heck there's no guarantees
anyway but especially when you hit 65 our health starts to fail like and for most Americans most
people in this world Health starts to decline at least and there's start to be different needs our
bodies break down maybe your body isn't going to be as capable of doing the job that you did for
all those years to earn your income and so now you have to start being like even if I wanted to
keep working what is my real earning potential am I really going to keep being able to do that or
if I get sick what kind of reduction in standard of living am I going to have to take just to be
able to last the rest of my life and not run out of money right and so these are the things that
you need to consider if you haven't already like I would encourage you to really do a deep dive
because my favorite favorite quote in the world I think and it's kind of tongue-in-cheek but just
because the ostrich buries his head in the sand doesn't mean the Lion's Den or plans have changed
right this this is your problem this retirement thing is a real problem it's a it's a thing that
you need to figure out a solution to and you need to create a plan for as good as Dave is at helping
you get out of debt he's not great at helping you plan for your future um and and his his
information while it seems great because it's kind of geared towards the masses it's actually in my
opinion it's it's super detrimental to most people that are listening to them because you're going to
get to the end of the rainbow there's a going to be no pot of gold you're going to find out you got
to work longer if you're healthy enough to do so or you're going to have to reduce your standard
of living because you didn't take some of these variables into consideration so anyway hopefully
you found value in that if you did please like it share it get it out there to people subscribe
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blessed inspirational day we'll talk soon see you
