## Dave Ramsey Retirement Calculator

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Topic Author
Boxtrap
Posts: 86
Joined: Tue Oct 10, 2017 1:13 pm

### Dave Ramsey Retirement Calculator

Is it just me or is Dave Ramsey's retirement calculator (link below) misleading?

His calculator asks you to input your expected annual return. Hypothetically, if I was to input 10% (which is roughly what the S&P has historically returned over the last 30 years or so on an annualized basis), I get a much different outcome than if I did the same exercise elsewhere using 10% as the CAGR. Is Ramsey's calculator assuming that 10% would be what the portfolio returns EVERY year as opposed to annualized over the long term?

I'm confused.

https://www.daveramsey.com/smartvestor/ ... calculator

Jags4186
Posts: 2776
Joined: Wed Jun 18, 2014 7:12 pm

### Re: Dave Ramsey Retirement Calculator

If you input you are going to save \$1000/mo, it will add \$12,000 on day 1 of the year and use the growth rate specified instead of time weighting \$1000/mo additions. That's why his calculator gives you a higher final number.

Mjar
Posts: 136
Joined: Wed May 23, 2018 5:18 pm

### Re: Dave Ramsey Retirement Calculator

it does assume each year of 10%, but that is the average over the long haul. Also his is not taking in consideration income increases, his is a flat monthly amount vs % of income like others.

Topic Author
Boxtrap
Posts: 86
Joined: Tue Oct 10, 2017 1:13 pm

### Re: Dave Ramsey Retirement Calculator

Jags4186 wrote:
Thu May 24, 2018 1:52 pm

If you input you are going to save \$1000/mo, it will add \$12,000 on day 1 of the year and use the growth rate specified instead of time weighting \$1000/mo additions. That's why his calculator gives you a higher final number.
Thanks very much. I knew something wasn't right, just couldn't figure out what.

Grt2bOutdoors
Posts: 19718
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

### Re: Dave Ramsey Retirement Calculator

Don’t use his calculator.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

dkeeney
Posts: 9
Joined: Thu May 24, 2018 1:50 pm

### Re: Dave Ramsey Retirement Calculator

The simplest way I could figure to confirm your 10% every year theory was to put in a 7.2% expected return for a 10-year period. If you aren't familiar with the rule of 72, it explains the doubling of principal (give or take) when years x % return = 72. So if you have \$1 million of principal and a 10 year time horizon and expect a 7.2% gain every year, you should wind up with \$2 million. That's what the Ramsey Investment Calculator spits out.

Nate79
Posts: 3928
Joined: Thu Aug 11, 2016 6:24 pm
Location: Delaware

### Re: Dave Ramsey Retirement Calculator

It is a very simple growth calculator. For most people it is fine as it clearly shows growth of savings and contributions as well as the effect of saving a little bit more. For the average person this is a good start.

Jags4186
Posts: 2776
Joined: Wed Jun 18, 2014 7:12 pm

### Re: Dave Ramsey Retirement Calculator

Nate79 wrote:
Thu May 24, 2018 2:05 pm
It is a very simple growth calculator. For most people it is fine as it clearly shows growth of savings and contributions as well as the effect of saving a little bit more. For the average person this is a good start.
It's just that everything he does seems to be misleading on the high side...high growth rates, high withdrawal rates, high risk portfolio.

My favorite Ramsey quote is "if I'm half wrong you'll be fine!" It's just that if he's half wrong and you earn 6% instead of 12% your portfolio will be 1/3 - 1/4 the size over 30 years. I don't know if people realize that!

9-5 Suited
Posts: 242
Joined: Thu Jun 23, 2016 12:14 pm

### Re: Dave Ramsey Retirement Calculator

Jags4186 wrote:
Thu May 24, 2018 2:09 pm
It's just that everything he does seems to be misleading on the high side...high growth rates, high withdrawal rates, high risk portfolio.

My favorite Ramsey quote is "if I'm half wrong you'll be fine!" It's just that if he's half wrong and you earn 6% instead of 12% your portfolio will be 1/3 - 1/4 the size over 30 years. I don't know if people realize that!
Unfortunately every Ramsey thread will forever spin in circles with people talking past one another. All of those "bugs" are "features" according to Ramsey ... his goal isn't to be mathematically correct, it's to encourage people who think there's no point in saving small amounts that they should do that because savings small amounts periodically over time can lead to X. So he exaggerates X to get people to do the behavior.

It's useless for people with strong financial acumen to pay attention to this, and we aren't the intended recipient of the advice by virtue of even knowing what a "mutual fund" and "Roth IRA" are.

Jags4186
Posts: 2776
Joined: Wed Jun 18, 2014 7:12 pm

### Re: Dave Ramsey Retirement Calculator

9-5 Suited wrote:
Thu May 24, 2018 2:23 pm
Jags4186 wrote:
Thu May 24, 2018 2:09 pm
It's just that everything he does seems to be misleading on the high side...high growth rates, high withdrawal rates, high risk portfolio.

My favorite Ramsey quote is "if I'm half wrong you'll be fine!" It's just that if he's half wrong and you earn 6% instead of 12% your portfolio will be 1/3 - 1/4 the size over 30 years. I don't know if people realize that!
Unfortunately every Ramsey thread will forever spin in circles with people talking past one another. All of those "bugs" are "features" according to Ramsey ... his goal isn't to be mathematically correct, it's to encourage people who think there's no point in saving small amounts that they should do that because savings small amounts periodically over time can lead to X. So he exaggerates X to get people to do the behavior.

It's useless for people with strong financial acumen to pay attention to this, and we aren't the intended recipient of the advice by virtue of even knowing what a "mutual fund" and "Roth IRA" are.
I get it. I guess if I were someone who started on the DR program on step 1 three possible outcomes could happen:

1) Everything works out fine
2) I follow his advice blindly and end up woefully unprepared for retirement
3) I follow his advice and discover the flaws of the later steps, therefore having me question the validity of the whole process from step 1

1210sda
Posts: 1423
Joined: Wed Feb 28, 2007 8:31 am

### Re: Dave Ramsey Retirement Calculator

I can't figure it out. I used 30 yrs, 1,000 per month, 12% return and zero present value. The Future Value per Dave's calculator is \$3,243,511.

I input the same info into my HP 12c financial calculator and got the following results:
1. End of period contributions (i.e.end of month) had a FV of \$3,494964
2. Beginning of period contributions (Beginning of month) had a FV of \$3,529,913.

The differences aren't major, but enough to make me wonder about it's accuracy.

1210

P.S. Jags 4186. You're right. The 12 months were put in on Jan 1. Very realistic .

Topic Author
Boxtrap
Posts: 86
Joined: Tue Oct 10, 2017 1:13 pm

### Re: Dave Ramsey Retirement Calculator

Jags4186 wrote:
Thu May 24, 2018 2:33 pm
9-5 Suited wrote:
Thu May 24, 2018 2:23 pm
Jags4186 wrote:
Thu May 24, 2018 2:09 pm
It's just that everything he does seems to be misleading on the high side...high growth rates, high withdrawal rates, high risk portfolio.

My favorite Ramsey quote is "if I'm half wrong you'll be fine!" It's just that if he's half wrong and you earn 6% instead of 12% your portfolio will be 1/3 - 1/4 the size over 30 years. I don't know if people realize that!
Unfortunately every Ramsey thread will forever spin in circles with people talking past one another. All of those "bugs" are "features" according to Ramsey ... his goal isn't to be mathematically correct, it's to encourage people who think there's no point in saving small amounts that they should do that because savings small amounts periodically over time can lead to X. So he exaggerates X to get people to do the behavior.

It's useless for people with strong financial acumen to pay attention to this, and we aren't the intended recipient of the advice by virtue of even knowing what a "mutual fund" and "Roth IRA" are.
I get it. I guess if I were someone who started on the DR program on step 1 three possible outcomes could happen:

1) Everything works out fine
2) I follow his advice blindly and end up woefully unprepared for retirement
3) I follow his advice and discover the flaws of the later steps, therefore having me question the validity of the whole process from step 1
I personally think it's VERY misleading - especially to those who have little financial acumen - to guide them towards a retirement calculator that could potentially show them they'll have a lot more money in retirement than they actually will. For those that take his word as gospel, that's very dangerous. I'm glad I'm not one of them, but a lot of people are.

9-5 Suited
Posts: 242
Joined: Thu Jun 23, 2016 12:14 pm

### Re: Dave Ramsey Retirement Calculator

Jags4186 wrote:
Thu May 24, 2018 2:33 pm
1) Everything works out fine
2) I follow his advice blindly and end up woefully unprepared for retirement
3) I follow his advice and discover the flaws of the later steps, therefore having me question the validity of the whole process from step 1
I think it's #3 where there's actually a good number of people who find success. Basically they used Dave's program to change their attitudes toward money/get out of consumer debt and then (as happens pretty regularly) discover Bogleheads or r/personalfinance or some other source that helps them refine their investing approach.

#2 is the worst, and the worst example is Dave's insane withdrawal rate recommendations. He tells widows to take out 10% of their life insurance money per year to replace their previous income since "the market averages 10-12%, so you'll never touch the principal." Goodness!!

1210sda
Posts: 1423
Joined: Wed Feb 28, 2007 8:31 am

### Re: Dave Ramsey Retirement Calculator

BTW, who the heck is Chris Hogan? What's his claim to fame? Is he one of Dave's ELP's?

1210

cfs
Posts: 4154
Joined: Fri Feb 23, 2007 1:22 am
Location: ~ Mi Propio Camino ~

### Re: Dave Ramsey Retirement Calculator

Avoid avoid avoid

Good luck y gracias por leer / cfs
~ Member of the Active Retired Force since 2014 ~