Does Dave Ramsey Want Me to Retire Early
If you have not heard who Dave Ramsey is and are part of the personal finance world you just might be living under a rock. The man is a saint to millions who have scraped and clawed their way out of debt to make the debt free scream heard around the world, or at least to those listening on the radio and podcast that day. Dave Ramsey preaches to never go in debt for any reason(he has some flexibility with a mortgage) and pay cash for everything, even the theme song of his show says “where debt is dumb and cash is king” how is that for a message to engrave in your mind. For those living under that rock or those not reading every personal finance article and podcast I can get my hands on, Dave Ramsey has a template of sorts to walk you right through your financial life in what he calls the Baby Steps. Here is a look at his plan. I’m not here to argue any of the points made by Mr. Ramsey, I’m just here to find the answer to a simple question. Does Dave Ramsey want me to retire early?
To answer the question I did what any red blooded American would do and went to Google for answers. OK, let’s try “Dave Ramsey retire early” that should get the ball rolling. I’m not going to go through the 170,000 results that came up, but I am going to dive in and see what’s out there.
First off let me say I have never heard Dave Ramsey mention early retirement in a positive light, I have heard callers mention the thought of retiring early and Mr. Ramsey goes into dramatic theater performance asking “What are you going to do with your life if you are not working”? As if once the 9-5 job is stopped life ceases to exist. He’s definitely hard on those who mention it, so I’m not expecting great results in my search.
Well I’ll be wrapped in bacon, I found one, http://www.daveramsey.com/blog/can-you-retire-early
The name of the article is Can You Retire 10 years Early? I’m getting excited over here, let me start writing my Dear Dave fan mail thanking him for the early retirement plug, I can’t wait till this goes mainstream! Tongue in cheek I think is the correct term on what that sentence was all about, maybe sarcasm might be better, I’m just a 9-5 finance guy, not sure if I nailed that one.
In the article they use a hypothetical guy name Joe, which is the picture of the every day common man or the average Joe. In the example Joe has made 50K each year in salary his entire life starting at 25 (most likely for simple calculations) and will make that same amount his entire life. Joe is investing 15% of his money or $625 per month through all 40 years until he hits retirement age at 65, which will put Joe with a 8% return at 2 million dollars and at a 12% return at 6 million dollars, based on Joe’s 50K salary and the first time I have ever seen Dave Ramsey mention the common 4% rule, that will give Joe $80,000 based off of a 12% return, an even higher salary than he currently has in place. Life is easy when you make 12% on your money, but I’m happy to see Mr. Ramsey dial it back a notch, but he did fail to mention that even for 30 years at 8% return Joe will have $900,000 or a 4% withdrawal rate of $36,000 if you plan to retire 10 years earlier. I’m not here to argue about the return on your investment, I’m here to figure out if Dave Ramsey has given his blessing to The Money Mine, Frugalwoods, 1500 Days, Done by Forty, and Even Steven Money to retire early!
The article itself does not say specifically to retire early, instead it asks Joe to make a choice, more money or early retirement. In most cases when the personal finance community talks about early retirement we tend to lean towards an extreme early retirement of 30-45 years of age. Dave Ramsey will not be endorsing Even Steven Money on his Early Retirement Adventure to retire before 40, he will look at the results and I’m sure be very pleased, but his baby steps don’t lead towards early retirement in a way the Even Steven Money Early Retirement Baby Steps™ do, in my humble Midwest opinion.
- Pay off all Personal Debt-Snowball, Avalanche, Mr. Freeze, I don’t care how it gets done, just do it. Oh yeah Debt Tornado!
- Have a Catalyst Investment-Stocks, Bonds, Real Estate, Peer to Peer Lending, Small Business, once again which ever one is your preference
- Create a Secondary Investment Income Stream-Choose one from above and invest.
- Have Tax Deferred Accounts for Retirement Age-This is seen as a bonus account, for example if you retire at 40, most calculations are based on 25 years of retirement, this is the bonus account or the chocolate on your ice cream.
- Have an Emergency Fund That Fits Your Comfort Level-3 months, 6 months, 1 year, just make it acts like the ocean waves and helps you sleep well at night
- Retire Early-Psychologically hard for some to do, but it’s the next step once your investment income or 4% withdrawal rate is greater than your expenses and you have that emergency fund tucking you in at night, you are there my good man or woman, YOU DID IT!
- Enjoy your Life and Give to Others!
Dave Ramsey says to think about taking retirement 10 years early, well like many of you out there I want more, shooting for 27 years! It’s funny in the article the question is asked is it worth more than a million dollars to retire 10 years early? Looking at it only down that specific lens I would want 10 years of my life to enjoy and experience the freedom rather than 1 million dollars, especially when in the scenario the nest egg is 2.9 million dollars sitting comfortably next to you. If you have made great investments along the way and built yourself up to a point of early retirement the question becomes “When is Enough”? Should I work 10 years or 12 years because my money would grow an extra $200,000 and as you get closer to financial independence, that’s the decision you are making, I’m looking straight at you Mr. 1500 Days in this special call out edition on your upcoming decision.
Those who have put themselves on a path to financial independence have made a plan to make “Enough” because if they kept on the same savings track they really could become multi-millionaires and each individual has made a decision that Freedom is more important than Money at that point. Deciding to buy a Toyota Camry is enough for them, rather than buying a Range Rover, the difference financially can be mind blowing, but it’s a simple choice of freedom over possessions. We in the Even Steven household have decided that we do not need 2 vehicles and are perfectly fine with one and taking the train and bus to work. The vehicle is paid for and fits the 10% car rule for those looking to reach financial independence, but it’s a decision we made in the pursuit of Freedom, not material possessions.
In conclusion, Dave Ramsey has not sent me his blessing to purse early retirement via Twitter or Facebook in fact there is a very good chance the man does not know I exist. It does turn out that he knows that many of us will come to a point in our lives where we ask ourselves to choose more Money or more Freedom. Those on the path to financial independence, all 27 of us and growing have made that choice already and will continue to strive to reach our financial dreams and the pursuit of happiness and freedom from a cubicle, desk job, or whatever environment is taking you away from your version of Freedom. Dave Ramsey and society may not believe extreme early retirement is possible or have a website like Even Steven Money dedicated to the journey, but either way I wish you the best of luck on your path to financial independence, I know you have my approval to retire early.
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