An arguement that counters Ramsey

[al_carl]

Originally Posted by BretE

I moved my money around yesterday, couldn't stand it any longer. When she asked what kind of return I was expecting I told her I would be ecstatic with a 4% guarantee for life. I can't imagine planning on anything much more than that in this day and age.....

There are places that will guarantee your principal and a base rate of return over some period of years. You might want to look into that.

I'm still young enough to not be bothered by a bit of risk.

My Roth has tracked over 11% for the 1 year, 5 year and lifetime periods. 1 year is WAY up.

My 401k isn't doing quite as well but it's still >10% over the long run.

[BretE]

Originally Posted by al_carl

There are places that will guarantee your principal and a base rate of return over some period of years. You might want to look into that.



I'm still young enough to not be bothered by a bit of risk.



My Roth has tracked over 11% for the 1 year, 5 year and lifetime periods. 1 year is WAY up.



My 401k isn't doing quite as well but it's still >10% over the long run.

Yeah, the advisor was telling me they had guaranteed funds I might want to look at. Guessing I'll have to wait until I hit 59 1/2. I just went into a 2020 retirement fund. Conservative but should outperform the stable fund I've been in. Little more risky but I'm not planning on tapping into the acct much for awhile anyway. I am retiring soon so I don't feel comfortable with too much risk at this point....

[JFolm]

Originally Posted by al_carl

There are places that will guarantee your principal and a base rate of return over some period of years. You might want to look into that.

I'm still young enough to not be bothered by a bit of risk.

My Roth has tracked over 11% for the 1 year, 5 year and lifetime periods. 1 year is WAY up.

My 401k isn't doing quite as well but it's still >10% over the long run.

This has been a good year. 17% YTD

[al_carl]

Originally Posted by JFolm

This has been a good year. 17% YTD

My Roth is 23% YTD

[Huntman3]

Originally Posted by al_carl

What rate of return would you suggest to someone that is looking to do long term planning?

The S&P return since 1997 (20 years) has been right around 6% - that assumes a person is 100% invested in stocks and that is almost never advised once a person is near or in retirement.

In 2000 to 2003 the S&P returns were: -10%, -13%, and -23%. In 2008 the return was -39%.

So lets say you had fully retired in 2000 and all your money was invested in stocks and you were withdrawing from your nest egg for income. The combined market loss your first three years of retirement would have been -46%. Recovering from that would be close to impossible. That is why it is often stated that the most important years of your retirement is the five years before you retire and the five years after you retire. If you are fully invested and you are unlucky with your timing, then recovering can be very difficult.

So to answer your question - assuming an 8-12% return throughout your retirement would require you to be fully invested in stocks with all your money while hoping you did not get unlucky and retire during a stretch that the market was not doing well. Your return, for example, if you were fully invested and retired in 1999 to now would have been approximately 4-5%.

IMO projecting a 4-5% assumed return on my retirement nest egg makes sense.

[BullyARed]

Originally Posted by Huntman3

A perfect example on his radio show today. Lady calls in - she and her husband are in the late 40s and asking if they have enough to retire. Ramsey ask how much they have total to live off of and she says a million. He tells her that if it is invested and if they earn 10%, then they can take the earnings ($100,000 per year) and live a good retirement from then on.

What an absurd financial answer! For starters at their ages there is a high probability one or both of them will live another 40-50 years. He made no mention of the impact of inflation - even at 2-3% per year inflation the $100,000 will have much less purchasing power over that many years. That alone will kill their retirement based on the advice he gave.

He later gave them the math again and said to use 8 or 10% earnings per year on their investments. The only way to average that percentage over time is to be totally invested in stocks - and that is very risky for anyone during retirement (remember 2008-2009 anyone?). He constantly tells people to factor very high investment returns to determine their retirement.

What if during their first year or two of retirement their investments lost 8-10% each year but they withdrew $100,000 anyway? They will have dug a hole they most likely can not recover from.

My entire point is this - not only will this couple who called in make retirement decisions based off of his flawed advice, many others listening may do the same. As I have stated before - he knows just enough about some things to be dangerous

I heard that too when I was driving from work. I thought to myself 10% every year! How one can do that? They don't get 100,000, 20% tax plus 10% early withdrawing penalty. He shot from the hip to me.

[al_carl]

Originally Posted by BullyARed

I heard that too when I was driving from work. I thought to myself 10% every year! How one can do that? They don't get 100,000, 20% tax plus 10% early withdrawing penalty. He shot from the hip to me.

There’s no penalty. They are both 59 and retiring in a year or more.


Sent from my iPhone using Tapatalk

[Huntman3]

Originally Posted by al_carl

There’s no penalty. They are both 59 and retiring in a year or more.


Sent from my iPhone using Tapatalk

man you are living in another world - by your own admission inflation was NEVER mentioned - forget taxes or penalties - they go broke in ten or so years because Dave forgot to tell them how inflation will eat them up based on his advice

[al_carl]

Originally Posted by Huntman3

man you are living in another world - by your own admission inflation was NEVER mentioned - forget taxes or penalties - they go broke in ten or so years because Dave forgot to tell them how inflation will eat them up based on his advice

Calm down. I was only responding to Bully saying they would get the 10% early withdrawal penalty.


Sent from my iPhone using Tapatalk

[BullyARed]

Originally Posted by al_carl

There’s no penalty. They are both 59 and retiring in a year or more.


Sent from my iPhone using Tapatalk

Read it again.


Originally Posted by Huntman3
A perfect example on his radio show today. Lady calls in - she and her husband are in the late 40s and ask....

Late 40 is like 48 or 49!