![]() Furthermore, higher withdrawal rates can be rational when we account for a retiree being willing to take some risk of running out of money, particularly when they have some guaranteed income, like Social Security, to provide a spending floor. However, while an 8% withdrawal rate is high, it is not necessarily as catastrophic as most advisors would suggest, given both the reality that many retirees can and do adjust their spending later if it becomes necessary… and that in practice, most retirees reduce their spending in the later years, anyway. Which means the most psychologically motivating approach really is to tackle the smallest debt first – actually pay it down successfully – changing one’s self-image to someone who can successfully tackle the rest of their (higher-interest) debt, too.Īnd many financial advisors, especially those who observe Bill Bengen’s 4% Safe Withdrawal Rate rule as the established norm, have also criticized Dave Ramsey’s 8% retirement distributions as dangerously high. Yet while there’s no question that mathematically, paying off loans with the highest interest rates first is the most financially efficient method of debt reduction, borrowers who feel overwhelmed by debt are often more motivated to stick to a debt paydown plan when they experience the small psychological victories of eradicating their debt one at a time. Similarly, Ramsey’s advice to use the ‘debt snowball’ method – which advocates paying down one’s smallest debts first (in contrast to debts with the highest interest rates) as a means to tackle personal debt – is also under frequent attack. In other words, the more compounding you see yourself missing out on, the more “FOMO” (Fear Of Missing Out) motivation it can inspire… which in practice, has been an effective motivator for many of Ramsey’s followers to start developing good savings habits! And while some of the advice that Dave Ramsey has given (e.g., assuming a 12% stock return, endorsing the debt snowball method of reducing overall debt, and encouraging 8% retirement distributions) may not result in optimal outcomes from a strictly technical perspective, the reality is that Ramsey’s advice has effectively helped millions of individuals and families reduce their debt, manage their money responsibly, and get on track to establish good financial habits.įor instance, while most advisors would agree that Dave Ramsey’s 12% return assumption for stock market investors is an alarmingly high return assumption, the reality is that using a high return assumption helps clarify the power of compound interest and the magnitude of potential wealth that can accumulate when new investors start saving early. Despite his popularity, though, many financial advisors have criticized the investment and debt management advice Ramsey frequently gives his listeners and readers. Since then, he has helped millions of people with personal money management issues and has authored several best-selling books. All content on this site is copyright protected and/or trademarked as appropriate and may not be copied, duplicated or altered in any way.Dave Ramsey has hosted the popular “Dave Ramsey Show” radio program since 1992 and founded Financial Peace University in 1994. Reproduction of part or all of the contents on this site in any form is prohibited other than for individual use only and it may not be shared with any third party. While our intent is to make transmissions to and from this web site secure, it is understood that no warranty of security can be made and that unforeseen security breaches by "hackers" is a possibility, however slight. These links are provided for convenience only. In addition, you understand that any links to any other web site or services does not constitute endorsement of or warranty of any service, product or information provided on their site(s). You should refrain in taking any action based upon the information provided here until you have received proper counsel. While it is hoped the materials provided here are helpful as background material, it is not warranted either expressly or implied as accurate or complete. These materials and information should not be considered as, or a substitute for, accounting, tax or financial advice. This Web site is made available as a service to our clients and others for informational purposes only. #DAVE RAMSEY FINANCIAL CALCULATORS FREE#Feel free to call us to discuss your situation. Try these handy financial calculators to provide insight into your financial questions. ![]()
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