Preview of what we’ll cover today:

✈️ Pilot-Level Planning: Complex finances need tailored advice.

📉 Eight Percent Risk: Market averages ignore retirement volatility.

📊 Four Percent Rule: A conservative research-based starting point.

🎯 Custom Strategy: Pensions and spending needs matter.

🔥 Sequence Risk: Safe buckets protect during downturns.

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More About This Episode:

Dave Ramsey has built one of the most recognized brands in personal finance. Millions of people have followed his advice out of debt and into savings. But when it comes to how much you should pull from your retirement accounts each year, Ramsey takes a position that some financial professionals find hard to get behind. Today, we break it down: what Dave says, what the research says, and what Ryan actually thinks.

Go Deeper Into The Episode:

0:00 – Intro

0:56 – Ryan’s Experience with Dave’s Teachings

3:13 – Dave Ramsey’s 8% Rule

6:59 – Risk of Keeping 100% in Stocks

9:47 – Sequence of Returns Risk

11:01 – Work with Ryan

Ramsey’s 8% Retirement Rule Sounds Nuts At First

Resources:

Retire Pilots – https://retirepilots.com

Get your FREE Retirement Toolkit – https://bit.ly/3ZmZsaX

Pilot Tax – https://pilot-tax.com/

The Pilot’s Advisor Podcast is also on video. Watch & Subscribe on YouTube: https://bit.ly/3EIEBW2

Connect with Pilot-Tax: https://pilot-tax.com/

Episode Transcription:

(Note, this is an automated transcription. Please forgive any errors.)

Walter Storholt 0:00
Well, coming up on today’s show, we’re going to talk about Dave Ramsey. He has certainly become one of the most recognized brands in personal finance, and millions of people have followed his advice out of debt and into more of a savings phase of their life. Fantastic accomplishments when that happens. But should you continue to follow his guidance, especially when he’s talking about withdrawing 8% in retirement out of your accounts, we’re going to talk a little bit about that, especially for successful pilots. Hey, I know pilots love podcasts, right? And so you’ve probably listened to some of Dave’s stuff at some point in time in your flying career. So should you continue to follow this guidance into retirement and beyond? We’re going to talk about that on today’s episode. Let’s get into it. Welcome back to the Pilots Advisor, Walter Storholt, alongside Ryan Fleming, as always, the Pilots Advisor. And Ryan, looking forward to this conversation today. Have you listened to much Dave Ramsey throughout your life? I feel like it would be hard to be an advisor and in this space and not listen to Dave.

Ryan Fleming 1:04
Well, I get to listen to excerpts of Dave all the time when people might send them to me.

Walter Storholt 1:09
Yeah,

Ryan Fleming 1:09
my actual digging in on Dave Ramsey was many, many years ago. I can actually specifically remember. I don’t know where I was coming from. Maybe I was coming from Oklahoma after one of the many times I was out there learning airdrop school or whatever for the C 17, but I I specifically remember listening to Dave Ramsey on I 40 eastbound, you know where I think I listened to it all the way through and was constantly trying to to learn more, get better, different perspective. But I mean, we’re talking 2005 yeah. early on listening to Dave’s principles, and and the thing I like to tell my clients now, I think that Dave Ramsey has a lot of great things that he says, and I think that for the average person, listen to Dave Ramsey, but know that the person that he’s talking to is making $70,000 a year, and most of them are in massive credit card debt. So we’re talking about not the airline pilots of the world. So I like to think of Dave as hey, we got our junior high education on how to get out of debt. Going to keep it as simple as possible and as basic as possible. But where we’re at with airline pilots, we’re we’re getting into the graduate level. That’s where we want to get. We want to get out of high school. We want to graduate from college and maybe even get our master’s degree.

Walter Storholt 2:26
Yeah, Dave has certainly expanded his empire and his brand beyond just the get out of debt world. Though he teaches people how to get out of debt, how to then start being generous, how to give, how to save money for retirement, and there has been a recent article that came out with a recommendation from Dave Ramsey that now even got into the territory of talking about getting into retirement guidance and withdrawal rates being discussed. And so we’re going to break down that specific piece of advice that he sort of has dropped recently and break that down on today’s show. So let’s take a look, Ryan, at what he’s actually recommending and what’s the reasoning behind it, and then we’ll start to zoom out a little bit and figure out why he’s recommending this, where it may work, if it could, and I’d be really curious of your opinion of this. But basically, he’s recommending an 8% withdrawal rate annually from your retirement accounts, which would be double the conventional guidance, the old 4% rule that we’ve talked about before, right?

Ryan Fleming 3:24
Well, on the surface, I think that that’s crazy, right?

Walter Storholt 3:28
With that, with no other context,

Ryan Fleming 3:31
yeah. I mean, that’s that’s insane. Now, now I see why he’s saying it. He’s saying it that like, okay, if the S and P is going to give you 10% annualized every single year, then you can draw 8% You’ll be fine, but the math of retirement doesn’t work that way at all. I did a whiteboard on this that we’ll actually attach in the show notes, but it’s the difference between normal math with average rate of returns while you’re building your nest egg versus consistency of returns in retirement because things are totally different once you’re pulling income from your portfolio, and and the reality is that when the market returns are up and down, the volatility in the market you don’t want to be pulling 8% from your portfolio when your portfolio is down 12% That math doesn’t add up. That math is not good for you. That’s a good way to blow up your portfolio. So let’s talk about the 4% rule, though, because I mean I don’t. I think people hear about the 4% rule, but not not the average person on the street really understands it. So I think we should just kind of go through that first. Yeah, the 4% rule started from academia. You know places like College of Financial Planning and all these other places that truly study from an academic perspective the markets and retirement planning. Many of the places where we get all the certifications that I have, like the CRPC, the RICP, and the 4% rule dates back to the 90s, and it’s looking. At a 30-year picture of all the different possibilities of what the market could do, think of Monte Carlo simulation. Think of 10,000 unique things that the market can do. Looking at the the positive and the negative, and it’s basically saying that you have a 90% chance of not running out of money if you do a 4% safe withdrawal rate, regardless of what the market does, and it’s looking at like a 6040 split. I want to say the creator. I don’t even remember. Is it William Bengen Bengen or something like that? And then I know that guy’s even made updates. You know, he’s talking 4.6 4.7 where you have a lot of haters that even say no, the 4% rule won’t even work because they start looking at different asset class returns and and don’t have a lot of confidence that that’s going to continue in the market. So lots of different sides to this. I personally think the 4% rule is a good starting point. I think it’s very conservative, and overall, what I would say is, I think it’s much, much more complicated than just saying 4% Because when we look at retirement planning, do you have a pension? Do you have a military pension? How much is it out of these accounts that you actually need for income? All of these factor into your decision making. I think that the and this is why you look at it not only month by month but year by year you’re taking different snapshots to see where you’re at. I think that the go-go years in retirement versus the no-go years factor into this as well. So I think Dave Ramsey’s crazy with an 8% safe withdrawal rate. I think that 4% is probably a little bit conservative, but I think it’s much much more complicated, and you have to have a retirement specialist, income professional looking at it, helping you through the process, making sure you’re drawing from the right accounts and making good decisions based off of actual market conditions at that time. Walter, what do you think about the 8% that Dave’s thrown out here?

Walter Storholt 7:03
Yeah, well, I was going to say there was a catch that I didn’t give you when we were going through that that statement, but I don’t think it makes it any better. It feels like it just amplifies the risk even more. And the catch was that oh, by the way, this 8% withdrawal only works in his view if your entire portfolio is invested in stocks, and that doesn’t that just kind of make you give you a second heart palpitation after the initial 8% statement of now saying you got to put your entire portfolio to basically double down on on that strategy.

Ryan Fleming 7:33
Well, I think that really gets into risk tolerance and understanding the markets. I mean, I think that for many many years the 6040 portfolio has been what retirees go to. 60% in stocks, 40% in bonds. We need that 60% in equities to help us outpace inflation, so we don’t run out of money. However, I truly believe that people aren’t aggressive enough. Whether that’s leading up to retirement, whether that’s in retirement. I think equities are going to give you the best chance of long-term success. The key is having some sort of system in place for when the market’s down and the market’s pulled back. Where are you going to pull your income from? And I try to teach my clients about this. I call it the retirement jet engine, and we want to have some safe money assets for when this does happen, if you do build something like that out, well, guess what? Then you do have the ability to actually keep the throttles up all in retirement, having a lot more equity positions. So once again, I think there’s ways to pull that off. But I think that the way Dave Ramsey’s saying it, 100% in equities, let it do its thing, pull 8% every single year, I think that Dave could get himself in a lot of trouble for making those statements if he actually was a fiduciary, which he’s not. You know, he’s not. He’s a marketer.

Walter Storholt 8:50
Yep, not beholden to really regulators or licenses or anything like that, right? So it’s really marketing and entertainment as the primary push, and that’s good to remember, as well as like you said at the very beginning, who his audience is and what his primary advice over the years has been. That’s the wheelhouse, and so where you might be as a pilot, planning for retirement with lots saved, hopefully not in a lot of debt, and thinking about you know all the goals that you have in your retirement years. The advice for you needs to be a lot more specific, a lot more customized to your needs. So I kind of hear what you’re saying, Ryan. Your approach is to say, “All right, 4% rule, sure. We’ll take that as the starting point, just as a place to begin. But depending on your lifestyle and lots of other factors, we may move that up, we may move that down, we may have it be one thing for the first few years, and then change it to something else for the later years because of those slow go no go go years that you talked about.

Ryan Fleming 9:46
Absolutely, and one of the things that we didn’t really talk about that we got to throw that in there if we’re truly talking about retirement income planning and and what actually happens in retirement is is talking about sequence of returns risk. I mean, what are those first? Couple years look like once you finally jump in that retirement income pool. You know when you jump in the pool, and next thing you know, a lot of water is getting drained out because the market’s down. Well, that’s not good. Or you could have had a couple really, really good years and sitting fat, fat and happy and high on the hog. So sequence of returns risk and how to combat that’s a big problem, which I I teach my clients how to do that. I come up with systems to help them not be affected by sequence of returns risk. Once again, why you want a professional? But yeah, Dave Ramsey’s 100% stock portfolio, and then just put drawing 8% That that honestly makes me very nervous, almost sick to my stomach.

Walter Storholt 10:38
Yeah, so we’ll give that a big thumbs down. It sounds like on today’s show. If we’re, I think I think so. I think that’s

Ryan Fleming 10:44
that’s that’s that’s a kindergarten math with big old fat crayons, and I think Dave’s eating a few of those crayons.

Walter Storholt 10:51
Nice, I love that. Hey, I don’t think any more needs to be said. That’s the perfect wrap up right there. End it right there. Well done. Oh man, if you’ve got questions, Ryan’s there for you. He’s got answers. So if you’re a pilot, you’re trying to plan for retirement, you’re trying to save the right way, you’re trying to do all of those things that are going to help you accomplish your goals, but you’ve still got a lot of question marks surrounding your financial plan. You’ve never really put together that official plan. Now’s the time to reach out, have those conversations. Not when you get to retirement. Hopefully, you’re doing it before then as well. If it’s a few years out, now is the right time to make all these plans and decisions ahead of time, so that you’re going in with that game plan and not just flying blind. The way to set up that time to visit is by getting the retirement toolkit. This is packed with great information that Ryan’s put together specifically for pilots, and you’re going to be able to get that toolkit. And along with it, you’re going to get a free portfolio analysis, and that’s where you can meet one-on-one with Ryan. But you got to get the toolkit to unlock that free analysis. So let that be your first step if you’re ready to engage and talk a little bit more about your specific situation and get some custom planning in place. Ryan, thanks for all the help today. Enjoyed this conversation with you, and we’ll chat again soon.

Ryan Fleming 12:02
Sounds good, Walter. You take care.

Walter Storholt 12:04
You as well. That’s Ryan and Walter. We’ll see you next time, right back here on the Pilots Advisor.

Speaker 1 12:12
This episode is for educational purposes only and is not individualized investment advice. The Pilots Advisor LLC is an SEC registered investment advisor. Registration does not imply a certain level of skill or training. Past performance is not indicative of future results, and investing involves risk, including the possible loss of principal.

Transcribed by https://otter.ai