After Dave Ramsey unleashes on 4% rule, advisors unleash on him

investmentnews.com:

With 20 million weekly radio listeners, Dave Ramsey is perhaps the most influential media personality on money, which means some of his guidance can be particularly dangerous, financial advisors say.

There’s been a lot of reaction to Ramsey’s advice about withdrawing 8% from retirement accounts annually, after the radio host earlier this month decried 4% recommendations, dismissing academics who have studied it as “nerds.”

Some clients or prospective ones will have questions about which figure is closer to being right — and Ramsey devotees might not like his advice being critiqued. One advisor told InvestmentNews that she has lost prospects because she didn’t “preach the ‘Ramsey way.’”

The radio personality’s 8% version of that withdrawal rate rule is hardly new — he’s been espousing it for years. But withdrawal rates have been newsworthy lately amid new research showing that 4% is a safe starting point for most people.

“If you’re making 12[%] in good mutual funds, and the S&P has averaged 11.8[%], and if inflation for the last 80 years has averaged 4% … that leaves you 8[%],” Ramsey said to a caller on his radio show. “If you want to be a little bit conservative, 7[%], but sure not 5[%] or 3[%].”

The question was in response to guidance from Ramsey co-host George Kamel, who apparently advocated 4% to 5% withdrawal rates as being sensible.

“There are a lot of studies that are stupid in this space,” Ramsey said, expressing surprise that his brand had published the advice. “There are all these goobers who have always put this 4% crap in the market. And I’m just irate right now that we have joined the stupidity.”

Researchers, most recently a group at Morningstar, have put 4% out there as a starting point, as it has a 90%