Ramsey’s 8% Retirement Rule Sounds Nuts At First

Core Viewpoint - Finance expert Dave Ramsey advocates for an unconventional 8% withdrawal rate for retirees, which is significantly higher than the traditional 4% rule, suggesting that retirees can sustain this rate if they invest entirely in stocks [2][5][6]. Summary by Sections Withdrawal Rate Recommendations - Ramsey's recommendation of an 8% withdrawal rate is aimed at retirees who invest 100% of their portfolio in stocks, contrasting sharply with the conventional 4% rule that aims to ensure funds last for at least 30 years [4][6][7]. - The 4% rule is based on historical data, providing a 90% chance that funds will last through a 30-year retirement, while Ramsey's approach suggests that higher withdrawals can be feasible under certain conditions [4][5]. Investment Strategy - The rationale behind the 8% withdrawal rate is tied to the historical performance of the S&P 500, which has averaged a 10% annual return. This implies that if retirees withdraw 8%, their investments could still grow over time [8]. - However, Ramsey's strategy carries significant risk, particularly during market downturns, as a 100% stock allocation can lead to substantial losses with limited recovery time [6][7].