Dave Ramsey Eviscerates Co-Host George Kamel for Preaching the 4% Rule
Release Date: 11/22/2023
Two Experts Debate When You Should Take Social Security—But here’s the TRUTH!
The Power Of Zero Show
Today’s episode revolves around one of the biggest financial debates among pre-retirees and retirees: When should you take Social Security? Host David McKnight touches upon the recent debate of two of the smartest voices in the field – Dr. Laurence “Larry” Kotlikoff and Dr. Derek Tharp – on this exact question. Dr. Tharp, out of the University of Southern Maine, notes that economists commonly recommend delaying social security benefits until age 70. Boston University’s Dr. Kotlikoff agrees and explains that delaying can give you a 76% higher monthly benefit compared to taking...
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What REALLY Happened with Kyle Busch's $8 Million Lawsuit against Pacific Life
The Power Of Zero Show
David McKnight looks at what happened when NASCAR legend Kyle Busch reportedly lost $8+ million in what was supposed to be a tax-free retirement plan. The plan Busch relied on was built around an indexed universal life insurance policy. According to Kyle and Samantha Busch’s lawsuit, they paid more than $10.4M into several IUL policies issued by Pacific Life Insurance between 2018 and 2022. While these policies were pitched as a safe, self-funding, tax-free retirement plan, things didn’t go as promised… Poor design, unrealistic expectations, a delayed 1035 exchange, and poor...
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The Financial Guru Hall of Shame--Who's Leading You Off a Cliff?
The Power Of Zero Show
David McKnight focuses on three of the biggest names in personal finance – Dave Ramsey, Suze Orman, and Ken Fisher – and why you should be careful with following their advice. David emphasizes that anyone trying to wring the most efficiency out of their retirement savings should focus on advice that’s backed by math… not soundbites. While David Ramsey is the right person for people who are making less than they are spending, the same can’t be said for his retirement planning advice. For instance, he claims that 100% of cash value life insurance sucks 100% of the time. For...
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Suze Orman Says 3%, Bill Bengen Says 4.7%--Who’s Right on Sustainable Withdrawal Rates?
The Power Of Zero Show
David McKnight compares the approach of some of the biggest names in personal finance: Suze Orman, and William “Bill” Bengen (the man who invented the 4% Rule). In a recent interview covered by MSN, Suze Orman declared flat out that the 4% Rule is dead since markets are volatile, interest rates fluctuate, and people are living longer. David shares the “origin story” of how the 4% Rule came to be – and its creator Bill Bengen. Interviewed by MSN, Bengen updated his research and concluded that, based on current data, a 4.7% withdrawal rate is now sustainable. David compares Orman’s...
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Why Dave Ramsey’s Roth Conversion Advice Could Cost You a Fortune
The Power Of Zero Show
David McKnight discusses one of the most destructive pieces of retirement advice he has ever heard: that you should never do a Roth conversion in retirement or within five years of retiring. Dave Ramsey believes you should forego doing a Roth conversion if you’re within five years of retirement or are already retired – because of the so-called Five-Year Rule. The problem with this approach, according to David, is that Ramsey is misinterpreting what that rule actually means, in addition to confusing multiple rules and applying them to the wrong people. Ramsey’s advice, continues David,...
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Four Ways to Pay Tax on Your Roth Conversion
The Power Of Zero Show
David McKnight addresses something that can make or break your Roth conversion strategy: how you actually pay the tax. David kicks things off by sharing that Federal and state estimated tax payments are usually made in four equal installments: April 15th, June 15th, September 15th, and January 15th of the following year. Did you know that doing a Roth conversion in December, like many people do, will lead to the IRS pretending that income was earned evenly throughout the year? If you don’t account for that, you could get hit with an underpayment penalty (8% of the underpaid amount)....
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I’m 52 Years Old and Have No Bonds in My Portfolio (Smart or Dangerous?)
The Power Of Zero Show
David McKnight explains why he has chosen to avoid bonds entirely and why you might want to rethink how you protect your portfolio as you approach retirement. David kicks things off by illustrating the so-called sequence of returns risk. According to conventional wisdom, bonds tend to be less volatile, so they help smooth out the rough years in the stock market. However, bonds aren’t the safety net they used to be. And over long periods of time, bonds tend to underperform stocks by a wide margin. David warns against “stuffing your portfolio with bonds just to be safe.” The...
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Dave Ramsey is Right About Bonds, but Not for the Reasons He Thinks
The Power Of Zero Show
David McKnight addresses something Dave Ramsey has been saying for years: “You should NEVER own bonds in retirement!” David points out that the tool that actually solves the problem Ramsey has been trying to avoid is the same one he spent years mocking on his call-in show: the Fixed-Indexed Annuity. Ramsey’s argument is that stocks outperform bonds over time – hence, bonds should be avoided as they’re “slow, underperforming, and risky.” David indicates what Ramsey is half right about, as well as something he’s missing the mark on… David discusses how bonds can act as a sort...
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What is the Power of Zero Retirement Philosophy?
The Power Of Zero Show
David McKnight walks you through what he believes to be the retirement strategy of the future: the Power of Zero approach. Congress recently passed the One Big Beautiful Bill Act, which makes the Trump tax cuts permanent. The brackets were set to expire in 2026, but now we’re told they’re here to stay… By 2035, the U.S. will need massive infusions of cash just to cover the interest on the debt of $37 trillion, not to mention Social Security, Medicare, Medicaid, and defense. When the Government needs money and no one else will loan it the money, it does the one thing it’s always done in...
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Greatest Retirement Mistake
The Power Of Zero Show
While on the golf course with his son, David McKnight got asked a question, by a couple of men in their early 70s, every pre-retiree and retiree wonders at some point: “What’s the biggest mistake people make when preparing for retirement?” Many people spend their entire career saving money in tax-deferred accounts like 401(k)s and IRAs. As that balance grows larger every year, it’s easy to get the illusion that all that money belongs to you, while a larger portion actually belongs to the IRS. How much of that sum you ultimately get to keep depends on what tax rates happen to be...
info_outlineDave Ramsey recently eviscerated his co-host George Kamel for preaching the 4% rule.
According to George, withdrawing only 4% of your savings is the easiest way to guarantee your money lasts throughout retirement.
George further adds that the 4% rule is a math-based approach to sustainable withdrawals in retirement.
For Dave Ramsey, the 4% is senseless and only geared toward stealing people’s hope for a brighter retirement.
He believes an 8% withdrawal rate is more sustainable since your savings will be growing at a rate of 12%; factor in 4% for inflation, and you’re left with 8%.
It’s clear Dave Ramsey is oblivious to the sequence of return risk, which could force you to run out of money 15 to 20 years early if you experience a series of negative returns in the first decade of retirement.
The fact is, even if you average 12% rates of return throughout retirement, you won’t be getting 12% every single year. Some years, you’ll get 20%, and other years you’ll get -26%.
David explains that the 4% rule gives you peace of mind that regardless of the swings in the market, you’ll have a reasonably high chance of not outliving your money.
Because Ramsey has millions of dollars, he has the license to utilize planning assumptions that are wildly at odds with history and academic research.
If you’d like a stress-free retirement, ignore Dave Ramsey’s advice and embrace strategies that are built on sustainable retirement planning principles like the 4% rule.
Mentioned in this episode:
David's books: Power of Zero, Look Before You LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code
PowerOfZero.com (free 3-part video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
David McKnight on YouTube
Get David's Tax-free Tool Kit at taxfreetoolkit.com