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Dave Ramsey is a popular personal finance personality, and he's got some great advice about paying back debt. But his advice about retirement planning leaves a lot to be desired.

You’ll get Dave Ramsey’s bestseller The Total Money Makeover as well as The Total Money Makeover Workbook, Rachel Cruze’s bestseller Know Yourself Know Your Money, an audiobook of The Legacy Journey, our new Know Yourself Money Assessment, an Essential Cash Envelope System, and two PDF e-books! This bundle covers the 7 Baby Steps in depth. Nov 12, 2019 - Read The Total Money Makeover: online and download in PDF, TXT, ePub, PDB, RTF, FB2 format.

Specifically, there are three ways Ramsey is steering his readers and listeners wrong about preparing for their later years. And the advice he gives on these issues could be costly and damaging. Here are the three worst pieces of retirement advice he gives.

1. You should choose mutual funds over ETFs or stocks

Ramsey recommends mutual funds over exchange-traded funds (ETFs) because:

  • Mutual funds are designed to be invested in over the long term
  • It's possible to outperform the market by selecting the right mutual funds
  • ETFs come with costs, and while the fees are usually lower than mutual funds, ETFs don't offer the professional management mutual funds do

But here's the problem.

ETFs can also be invested in for the long term. While you have the option of trading them like stocks, you don't have to -- you can keep them in your portfolio for decades. And there are a huge number of different ETFs, many of which also give you the chance to try to outperform the market.

You don't have to invest in an ETF that just tracks the S&P 500 -- you can choose a growth ETF, a dividend ETF, or even ETFs that track specific industries or sectors such as the marijuana industry or the healthcare industry.

So, mutual funds don't actually have these two advantages over ETFs. Ramsey's right about one thing, though -- mutual funds do typically cost more than ETFs do. These extra fees can really add up when saving over many decades for retirement, and there's little reason to pay them. Over time, history has shown that passively managed funds tend to outperform actively managed ones, especially after taking fees into account.

Without any clear benefit to mutual fund investing, Ramsey's advice that you pay more to put your money into them instead of choosing cheaper ETFs could end up needlessly costing you thousands in added fees over your investing career.

2. You can earn a 12% average annual return

Ramsey promises it's possible to earn a 12% average annual return on investments. But if you listen to this advice, you're very likely to have a major shortfall when it comes time to retire.

Ramsey's '12% reality' is based on the simple average returns of the S&P 500, which he reports as 11.64% from 1928 to 2020. The problem is, simple average returns aren't the most accurate way to measure how your investments perform. Here's why.

Say you invested $5,000 and your investment went up 20% in the first year and down 20% the next year. Your simple average return is 0% since your investment went up and down by the same percentage. But you don't actually end up with $5,000 at the end of year two. Your 20% gain after year one left you with $6,000. But, when you lose 20% off $6,000 -- or $1,200 -- you end up with $4,800 at the end of year two. Your actual ROI is -4%, not 0%.

As you can see, using simple average returns isn't going to paint a very realistic picture of how your investment is likely to perform. Instead, you need to use the Compound Annual Growth Rate (CAGR), which shows a more realistic 10.04% average S&P 500 return from 1928 to 2020.

Overestimating expected returns by almost 2% is really damaging, especially when you're talking about retirement planning over several decades. You're going to be left with a lot less money than you expected if you follow this Ramsey advice.

3. You should pay off all non-mortgage debt before investing for retirement

Ramsey argues you should do the following things before starting to invest for retirement:

  • Pay off all of your debt expect for your home mortgage
  • Save an emergency fund that covers three to six months of living expenses

Here's the problem. This could take years. And during all that time, you'd be missing out on employer 401(k) matches, which are literally free money. You'd also be missing out on tax subsidies for investing in a 401(k) or IRA. And you'd be losing the chance to earn returns in the stock market.

In other words, you'll be giving up huge opportunities to shore up your financial security as a retiree. And, if you're doing this to pay off low-interest car loan debt, which could be at a rate of around 4%, you're limiting your ROI needlessly.

You should absolutely prioritize debt payoff and saving for emergencies -- but not necessarily at the expense of your retirement funds.

Generally, it's a good idea to pay off very high-interest debt, such as payday loans, and to have some emergency money in the bank before you begin investing for retirement. But once you've got a starter emergency fund of a few thousand dollars and you've got payday loans paid off, prioritizing earning a 401(k) match can make a lot more sense than putting every spare dollar toward other debt. And there's generally little reason to pay off low-interest loans early when you stand a solid chance of earning a higher return by investing.

Instead of listening to this Ramsey retirement planning advice, make retirement investing a priority, set realistic expectations for your ROI, and focus on both historic returns and fees when choosing investments -- which usually means picking ETFs over mutual funds. If you do, you'll likely end up a lot better off.

People attend a worship service entitled “Watch the Darkness Flee,” Thursday, Jan. 14, 2021, at Ramsey Solutions headquarters in Franklin, Tennessee. RNS photo by Bob Smietana

NASHVILLE (RNS) — The company owned by Christian financial guru and radio host Dave Ramsey is no longer one of the best places to work in America, according to Inc. magazine.

The national business publication dropped Franklin, Tennessee-based Ramsey Solutions from its 2020 “Best Workplaces” list after the company was sued by a former employee, Caitlin O’Connor, for discrimination. O’Connor claims she was fired from Ramsey Solutions after applying for family leave because she was pregnant.

Her lawsuit claims Ramsey Solutions “discriminates against employees who do not strictly adhere to Ramsey’s interpretation of ‘Judeo-Christian’ values for non-work related behavior.”

In court documents, Ramsey Solutions said O’Connor, who is not married, was fired for having premarital sex, which violated the company’s “righteous living” policy.

“There is no dispute that Plaintiff was aware of this rule and terminated for violating it,” Ramsey’s lawyer said in a March filing. The company also said that, since 2016, it has disciplined eight other employees, both men and women, for having premarital sex.


After learning of the lawsuit, Inc. dropped Ramsey Solutions from the “Best Workplaces” list.

“Ramsey has the right to manage its business in accordance with its values, and the court system will determine the merits of the lawsuit,” Inc. assistant editor Sophie Downes wrote in announcing the decision. “Upon learning about the company’s ‘righteous living’ policy and how it is applied, we believe that it is incompatible with our standards of organizational excellence and have made the editorial decision to remove the company from our 2020 Best Workplaces list.”

About 3,000 companies applied to be included on Inc.’s annual Best Workplaces list. The list seeks to recognize companies where people love to work, one that sets the standard for excellence in company,” according to Inc.

Ramsey Solutions did not reply to a request for comment. The company, which employs about 900 people, has received millions in tax breaks for expanding its headquarters and promising to create hundreds of new jobs.

Dave Ramsey and other leaders have told employees the company relies on being named to the “Best Workplaces” list as a recruiting tool, according to a recording of a staff meeting discussing the surveys, obtained by Religion News Service. Leaders also warned employees that if they can’t answer surveys that put the company in a positive light, they should leave.

In this July 29, 2009, file photo, financial guru Dave Ramsey sits in his broadcasting studio in Brentwood, Tenn. Ramsey Solutions later moved to a new corporate headquarters in Franklin. (AP Photo/Josh Anderson, File)

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Ramsey, whose Financial Peace University materials are used by thousands of churches, has been at the center of controversy over the past year for his comments about the COVID-19 pandemic. From the beginning, he has downplayed the threat of the coronavirus and called mask-wearing a sign of fear and required all employees to work in the office. During a staff meeting last year, Ramsey also threatened to fire an employee who filed an OSHA complaint against the company’s response to COVID-19. The company held a large-scale, mostly maskless, in-person Christmas party.

Ramsey recently filmed a video in support of a law that would label mask mandates as discriminatory. His company is also suing a Florida resort, claiming the hotel’s enforcement of mask bans cost Ramsey millions in revenue when they had to cancel a conference.

The financial guru has long defended his company’s moral code, saying it is needed to create a godly work atmosphere.

Ramsey Solutions recently cut ties with Chris Hogan, a high-profile employee who was seen as a possible successor to Ramsey. In a video announcement posted in March, Hogan said he had “done some things personally that are not in line with Ramsey Solutions” and had left the company.

Chris Hogan was a host of his own show on the Ramsey Solutions platform. Video screengrab

“This week, new information came to light that Chris Hogan has recently done some things personally that are not in line with Ramsey Solutions’ core values,” the company said in a statement after Hogan left. “As a result of his current actions and behavior, Chris Hogan is no longer a team member at Ramsey or a Ramsey Personality. ”

Before his firing, Ramsey and other company leaders had long known of allegations of misconduct against Hogan. In an interview with RNS, Hogan’s ex-wife said she came to Ramsey leadership in November 2018 with allegations Chris had been unfaithful to her.

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Hogan has since admitted having at least two affairs, including one with a coworker at Ramsey Solutions.

At a May 2019 staff meeting, Ramsey told his employees, “If you are worrying about our integrity in leadership and are we covering up for (Hogan) because he is a big brand, the answer is no. No.”

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Dave Ramsey's The Total Money Makeover PDF Free Download

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But the situation drew criticism that the company’s moral codes were selectively enforced.

Dave Ramsey Pdf Free Download

Hogan left the company not long after O’Connor’s attorney had requested copies of his personal file as part of the discovery for the lawsuit.