HonestMath.com Weighs In on Dave Ramsey’s Epic Meltdown Over the 4% Rule

David and Khalen Dwyer discuss HonestMath.com’s research proposing a conservative 4% annual withdrawal for a 30-year retirement–contradicting Ramsey’s long-standing advice of an 8% withdrawal rate.

Khalen explains how Ramsey’s assumptions defy both mathematical principles and historical data. 

He also reveals the financial instability retirees may face when following Ramsey’s controversial 8% withdrawal rate.

Khalen and David agree that the primary job of an advisor is to help investors set reasonable expectations. If doing that means the advisor is a hope stealer, then advisors can wear the hope stealer’s badge with pride.

The first three to five years of retirement are very important and can set the economic tone for the rest of your retirement.

For Khalen, investors must realize that their risk appetite might change as they get closer to retirement.

The closer you get to retirement, the more your need to protect accumulated savings becomes more critical, as there is less time to recover from significant market downturns.

When you’re 100% invested in stocks, the swings in the market tend to be much wider, and that exacerbates the sequence of return risk for the investor.

David adds that poor investment performance during the initial years of retirement can deplete the portfolio more quickly than anticipated.

Retirees who experience market downturns in the early years of their retirement and withdraw a higher percentage of their portfolio to cover living expenses might accelerate the depletion of the portfolio.

Even if the market rebounds in later years, the portfolio may struggle to recover because the initial losses reduce the base from which subsequent returns are generated.

Khalen highlights the substantial risk associated with an 8% withdrawal rate using real-life examples and historical data.

David and Khalen question Ramsey’s aversion to bonds and insistence on a 100% stock allocation.

They discuss the psychological impact of market volatility in retirement, the importance of investing in bonds for portfolio stability, and why Ramsey’s all-stock approach just doesn’t make sense.

According to Khalen, one of the most important aspects of retirement planning is addressing the sequence of return risk. 

The sequence of returns risk is the risk of experiencing poor investment performance, particularly negative returns, in the early years of retirement.



Mentioned in this episode:

David’s books: Power of Zero, Look Before You LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code



PowerOfZero.com (free 3-part video series)

@mcknightandco on Twitter 

@davidcmcknight on Instagram

David McKnight on YouTube

Get David’s Tax-free Tool Kit at taxfreetoolkit.com


@honest_math on Twitter

Khalen Dwyer on LinkedIn

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