Today’s Dave Ramsey article in newspaper?

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Frita
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Today’s Dave Ramsey article in newspaper?

Post by Frita » Wed May 15, 2019 9:54 am

So, today I decided to read Dave Ramsey’s column in the newspaper for the first (and last) time. A teacher who is required to contribute 12% into state teacher retirement wanted to know if she should save an additional 3% or 15%. Dave said 15% would be overkill but 8-10% would be okay. That poor teacher will be slaving away with less alternatives like the folks with whom I work, flapping around like a weather vane to the administration directive of the day. I suppose that Wheaten levels explains why Dave is popular with the masses and that seems like radical advice. Thoughts?

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unemployable
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Re: Today’s Dave Ramsey article in newspaper?

Post by unemployable » Wed May 15, 2019 11:19 am

That 12% is a substitute for the ~7.5% most private-sector W2 employees pay to FICA (and some 15%+ for 1099ers).

But she almost certainly has MORE flexibility with retirement options than you get with Social Security. She most likely is able to take retirement at age 55. The vesting schedule is typically something like 1-2% of final salary per year worked. So if she started with the state at 30 and quit at 55 she'd get roughly half her final salary plus health care. This is a gross generalization but that's the ballpark.

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Re: Today’s Dave Ramsey article in newspaper?

Post by jennypenny » Wed May 15, 2019 12:13 pm

I'd give the same advice as Ramsey. He picked something in the middle of the range she gave, which works from a behavioral standpoint. It's better to give advice that people will adopt and stick with.

In my experience, I have more luck nudging people when I'm involved in setting the range of possibilities because I can help stretch the boundaries or move the scale in a particular direction. Once the range has been set, the outcome is very predictable regardless of the advice given.

IlliniDave
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Re: Today’s Dave Ramsey article in newspaper?

Post by IlliniDave » Wed May 15, 2019 4:42 pm

I really don't understand the OP's objection to what Ramsey said. Is the contention that what Ramsey said was too high, or too low?

Frita
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Re: Today’s Dave Ramsey article in newspaper?

Post by Frita » Wed May 15, 2019 5:25 pm

@unemployable
Teachers pay FICA and into state retirement in Wyoming. There is no medical provided and the amount is not nearly as good as your estimate. And Wyoming has one of the better teacher retirement systems and it’s solvent. I do not know where that woman was teaching.

@JennyPenny
I can understand your viewpoint, that middle-of-the-road advice is what someone writing into DR would be seeking and willing to follow. I guess I would have liked to see a higher percentage also presented as an option. Saving lots young and early is a game changer.

@IlliniDave
A range with a higher percentage! If that young teacher was considering 15%, why not explain that as an option?

Jason
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Re: Today’s Dave Ramsey article in newspaper?

Post by Jason » Wed May 15, 2019 5:29 pm

I understand this is a personal financial website and everything, but with everything going on in the world, you open up a newspaper and lose your shit over a Dave Ramsey column? I mean that's like one click above getting upset over what happened in Marmaduke.

Frita
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Re: Today’s Dave Ramsey article in newspaper?

Post by Frita » Wed May 15, 2019 5:39 pm

@Jason
Ha! I am not upset, just found it interesting as DR is more mainstream. Since I am about to be done working again, I am looking for new hobbies and such. Reading DR won’t be one. ;)

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Re: Today’s Dave Ramsey article in newspaper?

Post by unemployable » Wed May 15, 2019 6:20 pm

Frita wrote:
Wed May 15, 2019 5:25 pm
@unemployable
Teachers pay FICA and into state retirement in Wyoming. There is no medical provided and the amount is not nearly as good as your estimate. And Wyoming has one of the better teacher retirement systems and it’s solvent. I do not know where that woman was teaching.
https://retirement.state.wy.us/-/media/ ... 59BEEB4098

This document says it's 2% per year and you can take full retirement when your "age + service years" equals 85. So someone who starts at 30 can retire at 58 with a full pension. You'd get 56% of highest five-year salary, if you started before 2012 closer to 61%. That's not out of line with other states at all.

That's for the first entry, general public employees in WY. Some people (highway patrol, fire, judges) get better pensions than that with a shorter work requirement.

I understand you're a WRS beneficiary, and I used to do pension consulting as a career (have sent resumes to Cheyenne, even), so if your plan is vastly different from this I'd be interested in hearing about it.

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Re: Today’s Dave Ramsey article in newspaper?

Post by bigato » Wed May 15, 2019 6:52 pm

Rami Sethi gave a couple of interviews in a couple of podcasts that i listen to. I managed to listen to half of one and skipped over the other. But the part I heard was even mildly entertaining, while he was criticizing early retirement people. I can definitely feel the Wheaton levels things listening to his talk.

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Re: Today’s Dave Ramsey article in newspaper?

Post by Nomad » Wed May 15, 2019 6:54 pm

I've heard Dave Ramsey on his YouTube channel.
He approaches things in a very definite order and his standard advice goes something like this:

a) get $1000 emergency fund
b) get 3-6 months emergency fund
c) start making overpayments on loans except the mortgage in a specific order
d) when all loans are paid start paying 20% into pension.
e) overpay on mortgage until gone
-- round about here is the debt free scream ---
f) max overpayment into pension.

I think his advice on getting out of debt is exactly what many people need.

Frita
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Re: Today’s Dave Ramsey article in newspaper?

Post by Frita » Wed May 15, 2019 8:45 pm

@unemployable
Hm, I need to check into this as it does not gel with the winter 2019 notice of estimated benefit that I’d receive at age 60, assuming that I continued working. Perhaps there is an error?!

@Nomad
Sure, this could be good advice for some/many people. I find it a bit shocking though.

@bigato
Yes to “feeling the Wheaten level thing.” We must seem equally different to them?

IlliniDave
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Re: Today’s Dave Ramsey article in newspaper?

Post by IlliniDave » Wed May 15, 2019 8:46 pm

Frita wrote:
Wed May 15, 2019 5:25 pm
@IlliniDave
A range with a higher percentage! If that young teacher was considering 15%, why not explain that as an option?
Ah, I see. Thanks. It's true Ramsey doesn't "teach" early retirement. His framework is building affluence in a mainstream lifestyle. I've heard him say when asked why not more essentially that because of where retirement savings starts in his plan (after all non-house debt paid off and full emergency fund in place) there are competing uses for the money. Getting mortgage paid off/house purchased and college savings and the like. Even though FIRE isn't in his sights, if you listen enough he touches on a lot of things it's good to know about. FIRE types, and many investors, find aspects of his outlook objectionable, but I still tune in every now and then even though I might cringe a time or two. :D

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Re: Today’s Dave Ramsey article in newspaper?

Post by unemployable » Wed May 15, 2019 9:37 pm

@Frita

https://retirement.state.wy.us/-/media/ ... -2018.ashx

Looks like you lose 5%/year for every year you retire before your full retirement age if you do NOT meet the rule of 85. So quitting at 60 when you are in the age-65 tier would reduce your payout by 25%, and that's on top of not getting those five extra years of service credit. What can I say, I kind of enjoy reading this stuff.

Bringing this back to the original topic, a WRS beneficiary pays into both Social Security AND the state pension plan, which means it's basically extra forced savings in the 17%/year range, counting both the employer and employee portion, or think of it as 8+% with free matching. The benefit to saving more on top of this would be it's your money that you can spend whenever you want. Generally the state cannot take away accrued benefits -- the Illinois supreme court for one has ruled this -- but you still can't get them until the plan rules say you can. I do understand you can take a lump sum starting at 55 (not dependent on state), which is a really bad idea considering the whole thing's probably taxable.

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Re: Today’s Dave Ramsey article in newspaper?

Post by Jason » Thu May 16, 2019 8:08 am

If you reached a net worth of $0, you shouldn't be reading Dave Ramsey in the first place. That is, unless you are like me and enjoy other people's misery.

Frita
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Re: Today’s Dave Ramsey article in newspaper?

Post by Frita » Thu May 16, 2019 8:14 am

Jason wrote:
Thu May 16, 2019 8:08 am
If you reached a net worth of $0, you shouldn't be reading Dave Ramsey in the first place. That is, unless you are like me and enjoy other people's misery.
Jason, you are too damn funny! I really enjoy your observations and thoughts wrapped in your humor.

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Re: Today’s Dave Ramsey article in newspaper?

Post by Jason » Thu May 16, 2019 8:41 am

Go to Dave Ramsey you tube channel and look at the topics. If you have time, listen to a few episodes. He is a crisis manager. Like an intervention for people in serious financial situations. And he does provide benefit. Don't get me wrong. But once you get out from under water, he's the not the guy for you anymore. His investment ideas are just not realistic. I have learned things though. Like pet renting is a real thing. You actually rent the animal. But the catch is, if the animal dies while the rental agreement is in place, the lessee has to bury the animal. Death does not break the lease. And pet burial or cremation is not cheap. Our dead bird is in a little box and it's going to get buried with the last of the two of us to die. Also, if you so desire, you can spend $100,000 for an MBA in "Leadership" which is kind of funny when you think that the only place that degree is going to lead you to is talking to Dave Ramsey about how you are now $100,000 in debt because you were stupid enough to finance an MBA in leadership. Furthermore, there is unique club for people with over $1,000,000.00 in student loans. I forgot the exact number but they are real people.

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Re: Today’s Dave Ramsey article in newspaper?

Post by 7Wannabe5 » Thu May 16, 2019 9:11 am

One benefit in reviewing lower level structure is you might realize that there were some options you might revisit. For instance, if you combined the Dave Ramsey ladder, as outlined by Nomad, with "Mortgage Free!" by Rob Roy at Step E, you might actually happenstance find yourself FI sooner than urban dweller saving 50% to cover future theoretical rent allotment at 3 or 4% SWR.

"Mortgage Free" is a book on Paul Wheaton's recommended reading list, which offers multiple variations on the theme of how to build your own high quality house. It forces the decision between rural and urban at much lower level in decision tree than is usually encountered on this forum. One of the most interesting features of this book is an appendix entitled Mortgage Freedom Strategy Chart in which you place yourself in 1 of 16 categories based on combination of 4 different levels of Current Savings vs. Current Income, then the author offers a specific different strategy for each category. For instance, anyone with income over $60,000 and less than $500 in savings is given only instructions towards frugality. OTOH, if you are in Category 1 = less than $500 in savings and less than $5000 annual income then one of the suggestions besides "Get a real job." is "Marry a rich spouse." :lol: More relevant to this forum would be that for those in Category 10 ($10,000-$40,000 in savings, $5000-$30,000 in income), the author's next step ladder instructions are:

A. Buy land.
B. Build a temporary shelter, perhaps as core unit for an add-on house.
C. Keep replenishing the grub-stake as it is spent for materials and/or land payments.
D. Add value to indigenous materials on the property. Cut logs for rafters, joists, log-ends, or to take to the sawmill for lumber. Gather and sort stones for a masonry stove or thermal mass.
E. Watch for bargains on both used and new materials.

My point here being that although "ERE" the book provides a structure that is absolutely inclusive of the possibilities/strategies suggested in "Mortgage Free!", the status quo on this forum tends towards urban/high income/equity-market-investment. So, it is quite possible that an individual could jump level in "ERE" more readily with access to just Dave Ramsey level advice on personal economy combined with high level self-sufficiency skills. IOW, SWR might need not ever come into play. This is the model I see playing out much more often on permaculture forums.

Frita
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Re: Today’s Dave Ramsey article in newspaper?

Post by Frita » Thu May 16, 2019 11:08 am

@Jason
I will check out his YouTube as part of my research. “Crisis manager,” nice term.

@7wannabe5
Yes, I can see the value of revisiting levels. We’re been mortgage free more than two decades but still divide labor. I’d like to learn more about home repair and maintence, understanding my investments, and probably numerous others things I haven’t yet identified.

IlliniDave
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Re: Today’s Dave Ramsey article in newspaper?

Post by IlliniDave » Thu May 16, 2019 11:37 am

I meant to include this in my post above--Ramsey's advice once a person is totally debt-free, to include a paid-for house, is to save and invest aggressively. "Build wealth like crazy" is his informal way of referring to Baby Step 7. The steps are a little different than Nomad outlined above, titles are my paraphrases.

1. Get a $1,000 emergency fund in place
2. Pay off all non-mortgage debt
3. Get a "full" emergency fund in place
4. Start saving plan for retirement (generically 15%)
5. Save for college expenses (as required)
6. Pay off home mortgage asap
7. Build wealth like crazy (and enjoy it)

He coaches to do steps 1-3 in order. Then assuming there is income to support it, steps 4-6 can be tackled in parallel. Entry to step 7 requires step 6 is complete, but could be in parallel with 4 and 5.

If one starts totally debt-free and already in the habit of aggressive saving, then they start at step 7.

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Re: Today’s Dave Ramsey article in newspaper?

Post by Nomad » Thu May 16, 2019 3:59 pm

@IlliniDave
Apologies, I was doing it from memory. :)

@Jason
I agree, Dave R. has his place for those in debt, but his investment advice isn't great.

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