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Dave Ramsey’s Retirement Planning Advice Is Flawed: Here is How

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 
hit the Bell that way you're notified every   time I launch a new video until next time have a 
blessed inspirational day we'll talk soon see you

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