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I Take Issue with Dave Ramsey’s Retirement Plan

With regards to Dave Ramsey’s suggestions for how to retire based on taking risks with mutual funds, they don’t seem to take into consideration any of the following and I find myself wanting to ask Ramsey…

  • What if a person doesn’t have the ability to save any money to invest in mutual funds?
  • What if they live until age 93?
  • What if they have to go into a long-term care center?
  • What if mutual funds drop 43 percent in value when they reach age 57 like in 2008?
  • What if the premium paid on a term life insurance policy for 20 years is $63/month ($15,120 equity) and they outlive their term insurance and then they die?
  • What if their health isn’t good enough to qualify for a new 20-year term life insurance at age 57?
  • What if their children don’t leave home, or they do leave home one-by-one and come back 2-by-4 with grandchildren?

Here is my retirement plan:

  • Get your spending under control using a simple, efficient trackable Spending Plan so you can find wasted money that will allow you to save 10 percent of your income.
  • Deposit this money into a properly structured whole life insurance policy.
  • Make sure that 96 percent of the premium goes into cash values the very first year and beyond, and make sure you use a “mutual” dividend-paying life insurance company.
  • Elect the dividends to buy paid-up-additional life insurance so that at age 57 you will have paid-up-for-life insurance of over $700,000 so whenever you die this comes to your spouse tax-Docs and glassesfree and far and away exceeds the risky part of a $700,000 taxable mutual fund.

The genius of whole life insurance. In addition to the above benefits, whole life insurance that is paid-up gives a person permission to do a reverse mortgage and access more money for income. With paid-up whole life, it doesn’t matter if your health changes and you cannot qualify for a new 20-year term life policy, you already have it.  And this paid-up life goes until age 121 on a guaranteed basis. When you die, the benefit goes to your heirs tax-free!
I take issue with Ramsey’s recommendation of mutual funds as the way to fund retirement. His suggestions that mutual funds will just miraculously grow to $700,000 at age 57 are ludicrous, there are no guarantees of that.  Why give people such false hopes!??
When I suggest using whole life it’s because it IS guaranteed! You know that when a dividend is paid, it goes into guaranteed paid-up additional life insurance.   Of course dividends are not guaranteed, but once paid on an annual basis, this dividend goes directly into a guaranteed investment.
Dave Ramsey teaches sound money management principles and I respect him for that.  He pushes getting your spending under control and so do I. He emphasizes getting out of debt. And of course these two things are fundamental first steps to creating wealth.  But his opinions on 20-year term life and investing in mutual funds as a way to manage later years is way off base and can hurt a lot of people who rely on this method of retirement planning.
I strongly suggest you look at whole life insurance before going with the rest of the herd over the 20-year-term-life-insurance cliff.

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