Dave Ramsey Investing for Retirement
Dave Ramsey is at it again. Last year he created something of an uproar within the financial advisor community when he insisted onhis radio show that people could use a 7% draw rate in retirement and boasted that he “EASILY makes 12%” on his investment portfolio. We’ll explore those claims in a future blog post.
I’m on Ramsey’s email solicitations for his Smartvestor and CPA referral marketing programs. We explored Smartvestor in a blog post several years ago. Earlier this week I got an email inviting me to attend Dave Ramsey’s Investing Essentials Virtual Event.
For $199 participants get a 4-hour virtual seminar with Ramsey where he claims he’ll provide attendees his “personal playbook for investing.” Of course, like any marketing guru Ramsey offers a VIP ticket for $499 that includes two “financial coaching calls with a Ramsey Preferred Coach (a $400 value).” His email claims Ramsey will cover the following:
- How do I pick the right mutual funds?
- What’s the best way to get started?
- Is it a good idea to play the stock market?
- Is it wise to invest in Bitcoin?
- How can I get the best return on my 401(k)?
- What’s the right way to invest in real estate?
First, let me emphasize I’m all for financial education. I applaud Ramsey for helping thousands of people manage debt more responsibly. It’s easy in today’s world of instant gratification to succumb to credit card debt and Ramsey’s system of debt management has helped lots of people find discipline and self-control.
However, I’m skeptical Ramsey is the best person to be teaching a personal finance course and $199 seems expensive relative to the value received.
Here are just a few things one might want to consider before signing up for Ramsey’s Investing Essentials course:
- Ramsey has no professional credentials. He isn’t a licensed investment advisor, nor does he possess any professional credential like the Certified Financial Planner (CFP) designation.
- Ramsey isn’t accountable for the advice he gives. It’s easy to offer opinions to random callers while not having to live with the results.
- It’s impossible to thoroughly understand someone’s financial situation and emotional history around money in a 90 second phone call. Personal finance is first and foremost personal, and understanding each person’s financial situation takes far more time than Ramsey’s rapid fire radio show allows.
- Most personal finance recommendations aren’t black and white, and Ramsey’s advice is most often delivered as “good” or “bad” with no room for assessing the inevitable tradeoffs. For example, Ramsey recently insisted that a caller with a 30- year 3.5% mortgage should accelerate the payoff of his mortgage. It makes no mathematical sense in my opinion to pay off a mortgage at that rate when money market yields are in the 5% range.
- As Warren Buffett famously said, “successful investing is simple, but never easy.” Snowballing your way to wealth is far more about discipline and temperament than picking the right mutual funds.
- Building a solid foundation for building wealth isn’t complicated – pay yourself first (max your 401-k), pay off your credit card each month, spend less than you make and buy low-cost index funds. You don’t need to spend $199 to learn that.
- What is without question well beyond Ramsey’s teachings are the intricacies and complexities around personal finance, where making a mistake can be costly. Here are just a few examples:
- What’s the best strategy for taking distributions from retirement accounts once you retire?
- Should you buy long-term care insurance and if so, when should you buy it?
- Should you do a partial Roth IRA conversion and how is it done?
- Can tax planning in retirement result in paying less tax?
- How can you retire before age 70 and still maximize your Social Security?
I can say with a high degree of certainty that these are issues that Dave Ramsey’s Investing Essentials course can’t begin to address – and are topics that we help clients address every day.
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