Brady M. Haupt, RICP, AIF

This called sequence of returns risk… very important to take into consideration when structuring income from an investment portfolio.

Dave Ramsey's math is simple: stock funds average 12% a year, inflation runs 4%, so a retiree can spend the 8% difference.

The problem is that retirees do not earn the average. They earn a sequence, and withdrawals force selling more shares after early losses.

The average also overstates compounding: gain 20% then lose 20%, and $100 becomes $96 despite a 0% average return.

On a fixed, inflation-adjusted basis across historical rolling 30-year periods with a 50/50 portfolio, a 4% starting withdrawal kept a positive balance about 96% of the time, 6% roughly half, and 8% about one in ten.

The research has since moved, but not toward Ramsey: Bill Bengen's 2025 book updates his own famous 4% to roughly 4.7% with a more diversified portfolio, still nowhere near 8%.

To be fair to Ramsey, many retirees do underspend, and flexible withdrawals genuinely support more spending than a rigid rule. Flexibility is exactly what a fixed 8% with automatic inflation raises is not.

Would you rather retire on more savings with a rule that almost always lasted, or less savings with one that usually did not?

P.S. Once a week, I email the best money article I read, with my take on this week's top Facebook posts and what's new on the Ways to Wealth blog. It's free, and you can sign up on the Ways to Wealth home page.

R.J. Weiss, CFP®



The content shared here is for educational and informational purposes only. It is not personalized investment, tax, legal, or financial advice. Consult a licensed professional before making decisions based on your specific situation.

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