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December 11, 2023 at 02:54 PM
What You Need to Know
- Financial guru Dave Ramsey said retirees with a $1 million all-stock portfolio can withdraw 8% a year and blasted retirement researchers as goobers and nerds.
- Planning experts have panned Ramsey's advice as dangerous and mathematically wrong.
- Creative Planning typically recommends a 4% or 5% withdrawal rate and a diversified portfolio, Mallouk says.
Creative Planning President Peter Mallouk on Monday criticized as financially disastrous radio host Dave Ramsey’s recent advice on retirement withdrawal rates, apparently aligning with the retirement researchers, dubbed “supernerds” by Ramsey, who call for a more conservative approach.
“ Dave Ramsey recently advocated for an 8% withdrawal rate with a 100% stock portfolio. While I believe he has done a lot of good for many, especially when it comes to debt management, following this advice is a path to financial destruction,” Mallouk posted on X, formerly Twitter.
His post included a chart showing “many time periods when an 8% withdrawal rate led to zeroing out the portfolio.” The graphic showed 13 retirement periods from 1965 to 2007 when Ramsey’s advice would have completely drained a retiree’s all-stock holdings.
Mallouk didn’t tweet his own retirement withdrawal advice but told ThinkAdvisor via email that he generally recommends a 4% or 5% rate, “though I think a higher withdrawal rate works for many, depending on age.”
The 4% rule typically calls for initially withdrawing 4% of a portfolio in retirement, then adjusting the withdrawal upward for inflation each year.
“The 8% withdrawal rate is high risk with a high probability to fail not only with a 100% stock allocation, but with any allocation,” Mallouk said.
In a podcast last year, Mallouk said Creative Planning suggests retirees keep enough bonds in their portfolios to get through a crisis and invest the rest of their money in stocks and similar securities to stay ahead of inflation.
He told ThinkAdvisor on Monday that the firm recommends clients have enough bonds and income from their portfolio to cover five to seven years of income needs.
