The 3 Secret Killers of Retirement

The 4% rule is trash. Plain and simple.

Your retirement account withdraw rule should be closer to 2% or 3% yearly if you want your money to last. And at that rate, you will be living slim.

Listen to today’s podcast to see my point with REAL numbers, data, and simple math.

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TRANSCRIPTS:

Speaker 1 (00:00):

This is why banks are willing to lend you money for real estate, but they will not lend you money or stocks. There are risks, but at the same time, I’m much more willing to risk in a real asset than something that has arbitrary false values. AI type of stuff is trading Most of the stocks today, not humans. Computers are doing the trading. Do you really want to gamble your life away in something that is a gamble?

Speaker 2 (00:29):

Chris Miles was able to retire twice by the time he was 39 years old, but he’s not content to just enjoy his own financial freedom and peace of mind. Chris wants you to have your own ripple effect so you can live free today. He’s not the financial advisor you expected. He’s the anti financianal advisor you deserve. He’s jumping behind the mic right now, ready to make waves. Here’s Chris Miles.

Speaker 1 (01:00):

Hello my fellow Ripples. This is Chris Miles, your cashflow expert and anti financianal advisor. Welcome to our show. That’s for you. Those that work so freaking hard for your money and you’re now ready because you’re sick and tired of your money not working for you and you want to work for you today. You don’t want to wait 30 or 40 years for retirement. You want that money to work for you today so you can live that life that you love with those that you love. But most importantly guys, it’s not just about getting rich, it’s about creating a rich life because as you are blessed financially, you have a greater capacity to bless the lives of all of those around you. And that’s the ripple effect I’m here to create here for you guys today. Thank you so much for tuning in. Thank you for binging and sharing and doing all the things that you do.

(01:39)
Hey, I know a lot of you guys, you asked me a lot of questions about infinite banking and things like that. If you have questions, go to our website, money ripples.com. There’s a whole section on infinite banking and even if you don’t want to go to the website, even on our YouTube channel, we got infinite banking playlist that you can go and go to your heart delight and go down that rabbit hole. So check that out today. Alright, so I want to talk about this one secret killer that happens to your retirement. Now, this is one that really isn’t talked about enough, but it’s the whole thing that people talk about, about the debate of the 4% rule, the 3% rule or, well, I make, it’s not even a 4% rule. We know that it’s more of a marketing ploy, but I talk about two or 3% and you have these people talking about that and how much can you really pull off from retirement and there’s a lot of myths out there, and even guys like Dave Ramsey has those kinds of myths. In fact, even his own co-host, I actually just did a podcast on this before, if you guys remember about the whole 4% rule being a lie, his co-host George actually had said 3% like I’ve been saying, and Dave Ramsey freaked out, check out this clip if you need to see it again.

Speaker 3 (02:48):

What was it? A month ago, George Campbell released a video that said that the withdrawal rate for a 30 year time horizon should be closer to 3%. So if I can financial independence comfortably, then I was wondering if I could ease up on baby step four to pay off the house faster.

Speaker 4 (03:07):

Okay, I’m a little confused. I don’t know what the hell George is doing a 3% withdrawal rate because that’s absolutely wrong. I’m going to have to find out where that video is and get it taken down because that’s just wrong. You don’t need to have a 3% withdrawal rate. That’s ridiculous. Or I hope you misunderstood. I hope we didn’t put out trash like that. Was that four to 5%? No, it shouldn’t have be four to 5%. It ought to be more than that. I mean, if you’re making 12 in good mutual funds and the s and p is average 11.8, and if inflation for the last 80 years has averaged 4%, if you make 12 and you need to leave 4% in there for inflation raises, that leaves you eight. So I’m perfectly comfortable drawing eight, but if you want to be a little bit conservative, seven, but sure not five or three.

Speaker 1 (03:59):

Okay, so it’s no surprise. Oh my gosh. I mean Dave Ramsey was pretty pissed, wasn’t he? I mean it’s kind of humorous, but I mean he just starts going after George. Now George I know was actually trying to do real numbers here, but the thing is how do these numbers even come up in the first place? How does Dave Ramsey talk about pulling out? 8% should be fine, and if you want to be conservative, then take out 7%, right? Well, that’s because he believes, as you just heard him say, now, he always says on his tweets, you make 12%, but notice he said 11.8%. Now he makes it sound like he’s giving you a real stat. It’s not. Guys you’ve heard me do this time and time again, I go in the SP 500, update it about every single month to see what’s the real rate of return of the SP 500 guys.

(04:46)
It’s 8.1% and even if the people that want to argue on this say, well, they reinvest dividends, it still ends up being about 9.6%, okay? And by the way, this is the highest it’s been for several years as an average. Most of the time it’s between seven and 8% being at about 8.1% on the real return of the s and p 500 is rare. It does not happen all that often. How do I know? Because I keep tracking it. I keep going after it month after month. The reason it’s so high is because 1994 had a nice little low. It was kind of a bottom, and right now in 2024, we’re at an all time high. So it is creating this really this false perception of even higher returns, but let’s just even say that it is nine and a five or so percent after you reinvest dividends.

(05:34)
Okay, well, it’s still not 12, but what if let’s just say that you actually can get 8% in the market, which by the way, most mutual funds don’t even get that much, but when Davis says you can pull off 8% a year and you should have a 4% spread. Is that really true? Because there’s two different lines of thinking here when you go into retirement, you’ve heard it before. If you’ve talked to financial advisors, you do one of two. Either you get the financial advisor that’s only been around for the last 10 years and they tell you, oh, just keep all your money in the stock market. Don’t pull it out unless you’re like 85 years old. So they tell you to stay in the market, which is kind of like what it sounds Dave Ramsey’s talking about. Or you go the more conservative approach, which is I don’t want to lose money while I’m in retirement, and so I’m going to get more bonds and treasuries and things that are more safe and stable and maybe I’ll mix it with a little bit of stocks, but you’re definitely not getting 12% if you do that because the bonds aren’t going to make you that much money.

(06:28)
Your returns are going to come down, and so I’m going to play and pretend like you have hopefully the best odds of success, which is gambling in the market and that you get a real average return, not an actual, but it’s an average return of 8% a year. But here’s the problem. When a lot of people try to show you those numbers, they always show you that, hey, if you just made 8% a year, well yeah, you pull off 8%, it’s great, but does the market go straight up in a perfect order? It never does. It goes up and it goes down. They call it the Wall Street Waltz for a reason. Generally in about a seven year period, there’s about two down years, five up years. So another way to put it is one down year, two up years, that’s kind of what it is.

(07:12)
One third of time it might be down or flat, and then the other two thirds of the time it goes up. Well, I want to give you that real scenario, okay? So here’s some numbers. I know there’s a lot here, but I know for some of you that are the numbers nerds, you need to see this. For those of you that aren’t, you just need to see how it’s started and what the end result is, right? This is the stuff I had to figure out. This is what’s referred to as disinvesting, right? Because when you’re in retirement, you’re ideally pulling out that money. Now, I’ve said 3%, I’ve said that because with 3% you’re going to also have to account for inflation, and there could be negative years because I would imagine you don’t want to be taking the same wage every single year. Well, I’m going to show you taking the same wage every single year just to play devil’s advocate against my point, because if you’re taking higher amounts of money out every year, you’re going to run out of money faster.

(08:04)
So I’m going to again, play devil’s advocate just to go with Dave Ramsey’s little viewpoint here and why he’s full of crap. Okay? So here it is. You have a million dollars. Let’s say you’re lucky enough to save up a million dollars in the market, you want to pull off 8% or $80,000 a year. Now what if the market drops 10% that first year? Well, you dropped down to 900,000, right? You lost a hundred thousand of your million. You now have 900,000, and then this is what I’m referring to as disinvesting. You take out the 80,000 then and what you’re left with 820,000. So at this point, even though you were hoping to average break even, just take out the amount of money you’re making because the market should be averaging, and in this case I’m averaging it 8%. You would think, oh, I should be okay, so I should have a million bucks and it should pretty much stay a million bucks.

(08:53)
Well, that’s only if the market just keeps going up in a straight line at 8%, which it doesn’t do you lose 10% and then you have to take out your 80,000. You’re now already down 18%. So naturally, what do I do? I’m going to say, let’s say the next two years you get 17%. Now, why am I doing 17% per year for two years? If you do the math, 17 plus 17 is 34 minus 10% is 24. What’s 24 divided by three years? 8% average, right? So that’s why I did 17% per year. I know I could throw the numbers all over the place, but I don’t want to make it overly complex for you and really not for me either. So again, I’m just trying to do the Wall Street Waltz where there’s more up years than down. Now watch. Now notice the numbers start coming back up.

(09:37)
They start creeping back up because 17% is pretty awesome. It’s nice when you see those years happen when it’s around 20%, right? Well, we do that two years in a row, and you’ll see even by the third year it gets up even after you pull off 80,000 even gets up over a million bucks. So it’s like, yes, we did it, and then year four happens and you lost 10%, and then you pull out the 80,000 bucks and now you’re even worse off. Now you’re down to about three quarters of a million dollars, just a little over that, about 774,000 in year four. That’s left after you pull the money out. Now even with the market comeback, it gets back up to 885,000, but then you lose 10% and it brings you down to seven 17, and then it comes back up and it gets up to 800,000 and then boom, it goes down to 647,000 in year 10.

(10:21)
So notice that by 10 years, you’ve already used up a third of your money not breaking, even thinking you just stay at a million bucks forever, you’ve now lost a third. Why? Because that one losing year, even if it’s every three years, actually throws the numbers off, especially when you’re withdrawing money. Now, if you weren’t withdrawing money, it wouldn’t be as big of a deal. It would still be okay. It would still be growing, but it’s because we’re pulling money out even on the down years that it hurts you. Now, someone might say, well, we’re only have to pull out 8%. Are you really going to give yourself a pay cut each year when this happens? Come on, let’s be real. In reality, you’re not going to try to give yourself a pay pay cut. This is it. This is what you’re told to do, to take responsibility for your own life to actually do these numbers, to have this money and pull out of it so you’re not completely relying on the government with social security.

(11:16)
But look, if you’re pulling out and remember 80,000 a year, I’m not raising it for inflation. You would want to raise this for inflation. You would want more money just to factor that in, and we know that inflation’s not two or 3% like they’re aiming for. Come on. We all know it’s way easily at least four or 5%, and I’m being very conservative when I say it that way. So like I said, year 10, you’re already done a 647,000. Now you go all the way to year 20. Look what happens, and I even throw in the extra positive 17% just to bump it up a little bit more, and you’re at $300,000. How long do you think, especially when you get at least one more negative year in here, how long enough do you think $80,000 is going to last? How much longer? Maybe you’ll go out 25 years maybe, right?

(12:01)
And again, this is not even raising your lifestyle for inflation. If you raised the lifestyle for inflation, I didn’t do those numbers too. I just wanted literal. This literally took me a while to just to do it manually to show you where the numbers are. So I’m not lying to you, but look, you’re going to run out of money about 25 years if you’re trying to retire at age 60. Yeah, maybe you make it at age 85, but what if it doesn’t do as well as 8%? What if your funds that you have only do 6% average, right? Well, guys, if I were to do that, then what I’m going to do is I’m going to show you instead, 14% for those two years instead of with the negative 10 to average out that 6% a year, it’s going to affect it and it’s going to run out of money faster, much faster.

(12:47)
Every percent counts here. But again, when he’s lying to you, when guys like Dave Ramsey are lying to you telling you, oh, yeah, sure, you’re going to be fine. You’re going to make 12% in the market every single year. That’s the crap that we’re dealing with right now. This is the stuff that’s being taught by financial advisors, by the financial industry all over the place. But notice they don’t want to show you this. This right here is much closer to real life than the crap that they’re spewing out to you, isn’t it? This is the problem. This is why I’m scared, right? This is why I’m scared for people when they actually think this is going to work. This is why I’m scared for people when they think their 4 0 1 ks are going to work, their IRAs and everything else. Not to mention, of course, you’re getting taxed on this money, so there’s another issue too, but again, you’re relying on a stock market.

(13:36)
This is why I don’t put my money in the stock market, although I know how to probably use the stock market better than almost anybody watching this show or listen to this show right now because I used to be a stock trader and I taught others how to trade in stocks and options, so I know there’s probably some people better than me out there. I’m not saying I’m the best, but I’ve got pretty good background there. But despite my background, why do I refuse to be in the stock market, especially right now where it’s at all time highs because I know what the numbers look like. I know what it is where I can go somewhere else. Like when I’m looking at Main street investing versus Wall Street investing, I’m looking at things like real estate with real assets backing it up, and yeah, there’s always risk.

(14:14)
Yes, you could lose money, but the thing is that for me, if I own real property, it’s pretty dang hard for me to lose all my money. This is why banks are willing to lend you money for real estate, but they will not lend you money for stocks. And even when you say, well, actually, Chris, they let you do margin trading. They let you have a line of credit, yes, they do, but they also have full control that if you’re losing money, they can say, Nope, we’re taking our money out right now. We’re taking all back, and you lose everything or a lot of it, a lot of that money. I know I had a stock trader that was a student that insisted on using that margin trading account when he had no business doing it, and he lost 90% of his fund in one week because he traded options using a margin account.

(14:59)
They did a margin call on him, took their money back, and left him with almost nothing. That guy became a very diligent student after that point. He was almost suicidal. I swear it was horrible. I was worried about this guy, but he came back stronger and wiser because he had lost so much money. Here’s the thing, he could bounce back from that. If you’re gambling and rolling all your dice, hoping and praying that this is going to work out for you in retirement and this is your one shot, you don’t have a do over, you don’t have the ability to make that money back other than I’m going to have to keep working into my seventies and beyond, potentially. If that’s not what you want in life, why would you want to do it? This is again, why I look at real estate when I know I can still make for the most part, although it can fluctuate, but for the most part, I’m making at least double digit returns and it’s actual cashflow in my pocket.

(15:53)
Cash in my pocket, not even touching the principle. So where the stock market is pulling that money out and it’s decreasing it over time, I don’t have that issue because one, either I got a property that actually has cashflow coming from it and or two, maybe I have a contract or an agreement where I say, this is the interest rate. I get paid for my money. My contract says this. Now again, anything can happen. There are no guarantees. I keep throwing out disclaimers. I’m not giving investment advice, all this kind of stuff. I’m giving you this disclaimers because despite all that, there are risks, but at the same time, I’m much more willing to risk in a real asset than something that has arbitrary false values where literally AI type of stuff is trading. Most of the stocks today, not humans, computers are doing the trading.

(16:46)
They’re the ones doing it, and it’s all based on algorithms and headline articles and news that comes out. It doesn’t have to have logical sense, guys. It’s all based on really zeros and ones and what triggers a buy or a sell order. That’s it. Do you really want to gamble your life away in something that is a gamble, or do you want to do something that actually has a proven track record and can actually be predictable when it comes to your income? I can’t predict your income if you decide to go with the whole mutual fund thing and the stock market, I can’t predict it. This is why I left being a financial advisor. I couldn’t with honesty, go to my dad and say, you know what, dad? You should invest your money with me because I’ll be able to ensure that you get a good retirement.

(17:29)
I couldn’t promise that, guys. Not at all. Not to mention the guy had saved for decades in his 401k plan, and he paid off all his debt, including his house. He was mortgage-free and debt-free, and yet it still wasn’t enough to have a comfortable retirement. He did everything that Dave Ramsey would’ve taught you to do and it didn’t work. He’s living, and I have many, many other examples of living proof because it’s not enough, by the way, updated numbers from Fidelity with their 45 million clients now because the stock market went up, there’s now 800,000 people that have at least a million bucks in their retirement accounts, 800,000. That’s still just over one point a half percent. But remember, trans America studies said that over 35% of people thinks it’ll take a miracle to be able to retire a miracle. That’s something the people that are wondering, they don’t think it’s a miracle, but they’re not sure.

(18:18)
There’s uncertainty there, guys, less than a 1% success rate, and yet the majority of people still keep buying that piece of crap goods because that’s what you’re supposed to do, and that’s what every financial advisor tells ’em to do, because how they get paid, as well as the financial institutions who pay them right, and then get paid when you put your money in there and just let it set it and forget it and let it sit there for years and years and years, the time to bind this bull needs to stop. Now, the more you know, have a responsibility to do something about it. Again, I cannot legally tell you to sell off all your stocks and mutual funds and 4 0 1 Ks and IRAs. I’m not telling you to do that. I’m just educating you to let you know that this is real. This is why I had to leave financial advising because I knew I couldn’t give these promises to people.

(19:10)
I knew that. I knew that it was a gamble, and in many ways it was kind of a scam, and it’s a scam that goes up the highest levels of the financial companies that have a lot of money to keep lobbying and to keep you in ignorance because that’s where they make all their money. So the choice is yours. Do you want to keep giving in and become like the average American that is retiring or not even retiring, hoping to have some kind of retirement, or do you want to take control of your own life and your own destiny and your own freedom and have that power in your hands? I’m speaking to you. Those of you that actually want to be the heroes of the story, not the victims. If you’re willing to be a hero, do something about it. If there’s any way we can help you, you can always go to money ripples.com and reach out to us.

(19:52)
You can try to pass a victim calculator to see what you can actually do right now, but the time is now to do something about it, especially when everybody’s hyped up on hopium and especially when everybody’s hyped up thinking that the market’s going to go to the moon, and Bitcoin’s going to go to the moon. And the truth is, whenever they say to the moon, that’s usually when it comes crashing down. That’s when you see the falling stars, okay? Don’t become a casualty of this ignorance. Don’t become a casualty of that hype. Be a creator. Be someone who’s the hero of your story. Take control of your life. Now, that’s my challenge to you. Make it a wonderful and prosperous week. See you later. This is why I don’t put my money in stock market, but despite my background, why do I refuse to be in the stock market, especially right now where it’s at all time highs. I know what the numbers look like, I know what it is where I can go somewhere else. Like when I’m looking at Main street investing versus Wall Street investing, I’m looking at things like real estate with real assets backing it up, and yeah, there’s always risk. Yes, you could lose money, but the thing is that for me, if I own real property, it’s pretty dang hard for me to lose all my money. This is why banks are willing to lend you money for real estate, but they will not lend you money for stocks.