re: Did y'all catch Dave Ramsey rip George Kamel apart over withdrawing 4% from retirement?

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Buy your house with cash.

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To be accurate he recommends a 15 yr fixed/20% down W/ payments no more than 25% of take home pay which is still pretty unattainable for most first time buyers.

Ramsey loses me every time he says “a good growth stock mutual fund” and then proceeds to talk about how easy it is tho get double digit returns every year. Yet, he refuses to say exactly what magical fund.

Also, when he talks about real estate investing and plays up the “I have $600M real estate portfolio”…before he spouts some personal belief dogma.

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To be accurate he recommends a 15 yr fixed/20% down W/ payments no more than 25% of take home pay which is still pretty unattainable for most first time buyers.

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Yeah his advice is completely outdated in some aspects.

Sure, yes it's great financially to only have your mortgage payment be 25% of your after-tax pay, but to require a 15 year fixed rate mortgage on top of that in todays world is absolutely tone-deaf. Hardly anyone can afford decent housing under those guidelines.

A young couple making $150k/yr who would after-tax about $9.4k a month where I live. This is NOT taking into account deductions beyond taxes, which he says he wants you to put 15% away for retirement and such. Also assume they have NO debt, which is a pretty big assumption for a young couple maybe still not long out of college.

But lets use $9.4k as best case scenario, this means under his guidelines their mortgage/taxes/ins/HOA cant be more than $2,350/mo on a 15 year mortgage. In today's market a 15 year rate averaged 6.1% last week. If they plan on putting 5% down, this means they cant go above about $240,000 home. This assume ZERO HOA fee, which most townhome places around here definitely have too. Now where I live $240,000 doesnt even get you into a starter townhome, much less single family home. Our neighbors just sold a 1900sq-ft single car garage townhome for $381k. You could buy a complete 1k sq-ft dump maybe in the bad area of town down the way for $240k, but not exactly what a couple making $150k is probably looking for.

25% of take homepay on a 15 year fixed rate mortgage is an absolute dream for probably 80-90%+ of people out there if you're buying now.

Wife and I are looking at $600k-$700k or so houses right now and for us to "afford" that under his guidelines we would need to be have an after tax pay of $19k/mo and thats with a 20% downpayment on a $600k house with no HOA and no PMI.

I still like DR, but indeed this is one of the 2 biggest gripes I have with him.

1. Mysterious 12% returns on mutual funds year after year is disingenuous.

2. Always telling people Roth over 401k. The pre-tax/after-tax math is a wash, assuming tax rates stable. Reality is you need both, but I hate the way he frames it.

I've done many fundamental things right, such as getting a good job, investing in retirement as early and as much as possible, and not getting a divorce. Once I had worked a decade and switched jobs, I was able to gain full control over my investments by rolling over my 401k into an IRA. I followed conventional investment advice until I reached 40 and then followed unconventional advice getting to the $5MM invested (no real estate) mark by age 50. All of this by working a W2 job.

When I invest for income, the backtesting of the plan has been robust. For $1MM invested initially, here are some milestone numbers over Q413 thru Q321.

Total Plan Income ($): 1,726,697
Average Monthly Income ($): 18,567
Mini Tech Wreck Q418 Ending Balance ($): 1,022,637
Covid Crash Q120 Ending Balance ($): 1,019,652
Plan Ending Balance Q321 ($): 1,927,293
93-Month Principal Growth (%): 92

That time period was chosen because it's where we have actual data for the ETFs involved (including TQQQ). Using index-reaction multipliers you can simulate further into the past using proxies. In the extended crash that took the Nasdaq-100 down 81% from 4398 in Q100 to 833 in Q302, the math would have taken TQQQ to zero. The results hinge on if you believe ProShares would have implemented measures to keep the fund from getting delisted. Whether TQQQ bottoms out at a dollar or a penny doesn't matter much when you've come down that low from its peak of $130.14 in Q100. At that point, whatever you have invested in TQQQ is low -- so pick a 'lowest allowed bottom price' for TQQQ and simulate.

Here are the results from Q497 to Q403 simulating the Dot Com Crash (assuming a TQQQ bottom of $1.00):

Total Plan Income ($): 1,430,316
Average Monthly Income ($): 19,866
Plan Ending Balance ($): 954,709
72-Month Principal Growth (%): -5

Anyone who went through the Dot Com Crash would take negative five percent. Granted, the simulation is just that and imperfect, but encouraging.

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To be accurate he recommends a 15 yr fixed/20% down W/ payments no more than 25% of take home pay which is still pretty unattainable for most first time buyers.

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goodness how many people actually could afford to do that today

We should go fishing

His unwillingness to admit that credit cards can be of great benefit to responsible people is probably my biggest pet peeve.

I agree with the other poster about 15 year mortgages not being realistic in the current environment, but his 25% of after-tax is a good guideline.

I like his “pay cash for cars” philosophy if you can swing it, but it requires discipline and willingness to drive cars well past 10 years of life. It’s way too easy for people to overextend themselves with loans on a depreciating asset like vehicles (Covid notwithstanding) and most people buy twice as much vehicle as they need from a cost standpoint.

His basic guidelines are fine. I used to listen to his radio show a lot 15 years or so ago when it aligned with one of my regular drives. When you get a taste of the average person who calls into his show, you understand why he dumbs down so much of what he says.

It drives me insane he pretends taxes don't exist.