"Ultimately, the Ramsey rule indicates that you should withdraw 8% per year from your portfolio while retired, adjusted for inflation, and the idea, or at least the hope, is that your money will last indefinitely. This sounds fantastic, at least on the surface, but the hiccup here is that it relies entirely on you having a portfolio of stock-only mutual funds that will reliably produce 12% on average in annual returns."
"It won't come as much of a surprise to the world that there are plenty of baby boomers who carefully listen to Dave Ramsey and wholeheartedly believe the 8% rule could work for them. On the other hand, you also have a growing number of soon-to-be retirees who consider the divided world a better option for ensuring passive income and maintaining a comfortable lifestyle in retirement."
Mass retirements among baby boomers raise questions about optimal retirement income strategies beyond the 4% rule. An 8% withdrawal guideline assumes a portfolio concentrated in equities that consistently deliver about 12% annual returns, adjusted for inflation, so withdrawals could last indefinitely. That approach relies on stock-only mutual funds with no bonds or cash liquidity and is widely viewed by planners as overly optimistic given historical S&P 500 returns closer to 10% over the last decade and the effects of fees and inflation. Dividend-focused strategies offer an alternative by prioritizing regular passive income to support living expenses.
Read at 24/7 Wall St.
Unable to calculate read time
Collection
[
|
...
]