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Dave Ramsey Offering Dangerous Advice?

DaveramseyDave Ramsey is doling out dangerous advice on retirement planning?  That is the charge made by Motley Fool blogger Brian Stoffel.  The argument has spilled over to Twitter, where Dave has been engaging in a debate that has caught the attention of the financial media. Investment News even calls it a 'Twitter War.'  Dave invited Stoffel to appear on his radio show on Tuesday to defend his article.  It may be the only time you ever hear Dave this angry, so it was quite a unique moment to listen in to.   You can hear the segment by going to Dave's show archives page and selecting June  4 (hour 1).

So what is this all about?  Dave says in his books and workshops that people can average 12% per year if they invest using stock mutual funds.  Stoffel claims Dave's numbers are on the high side and suggests that around 9% would be a better number to use.  OK, I know you are starting to roll your eyeballs wondering what the big deal is here.  Well, Stoffel's point is that being off by a mere two or three percent would leave individuals with an enormous shortfall once they reach retirement.  Dave acquitted himself very well, giving Stoffel some excellent examples, including quoting returns from Standard & Poor's own website directly. 

RamseyadviceHere is what these financial bloggers don't get.  When you host a radio show and write books you are not doing financial planning.  Dave is not a financial planner.  You can't call up his office and get an appointment with him personally to go through your investments, tell you exactly what to do with your money, and print out for you a personalized twenty pound 'plan' to take home. Dave is doing what financial radio hosts and authors have done for decades; giving out pithy general advice and using 'rules of thumb.'  

I have been on both sides of this.  I owned a registered investment adviser and a broker dealer, and I have also hosted a radio and a television show.  When I was doing TV and radio I had to give one to two minutes answers to callers (or my producer would go ballistic).  When I was sitting in my office with a bonafide client that was a whole different deal, and two hour discussions were commonplace. Here is what Stoffel missed (and those piling on via Twitter) - Dave does not have a 'set it and forget' approach to any of this.  If you are going to judge Dave on the entire body of his work, you would understand that anyone following his advice would be conducting an assessment of their long term goals periodically.  So, if someone had lower returns than they projected, they would understand that they might need to throw in a few extra bucks to get back on track.  

This frankly reminds me of the kind of 'disagreements' I have on occasion with my teenagers, who are all too ready to correct 'dad.'  I may be sharing with a new neighbor that the grocery store is just '5 minutes' from our neighborhood and they will interrupt to say it is more like a 7 minute drive.  Well, they are probably technically right, but I don't think their interruption added much to the conversation.  I think the same thing can be said about the accusation that Dave's advice is somehow dangerous. Not only is it not dangerous, quibbling over such small differences in assumed growth rates seems pointless.

Well, one good thing may come out of all of this this - people may be thinking a little more about saving for retirement. That is a positive, no matter which side of this debate you fall on.

Helping you make the most of God's money!

James L. Paris 
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