Dave Says

Wednesday, January 23, 2008 at 1:44am

Dear Dave,

I’ve heard you tell people that having $90,000 to $100,000 saved up for retirement isn’t enough. That’s what I’ve got set aside right now, and I’m pretty sure it’s all I’ll ever need. Why do you think everyone should have a million or two saved up?

— Tom

Dear Tom,

The amount you’re talking about isn’t enough to retire on with any kind of dignity, and here’s why. If you make 10 percent off your money it means you’re living on just $10,000 a year. That’s below the poverty level.

Don’t misunderstand my message. I’m not about being greedy, and money is not the key to happiness. Money is good for three things — personal security, helping others, and it’s good for fun. You need to do some of all three.

What I AM about is changing my family tree. With money we can leave behind the training to have good money in good people’s hands, and that can have a huge positive impact on this culture. I want good people to have big piles of money in order to do good things.

Now, I want you to understand something else. I don’t want to leave my kids in a situation where they have lots of money and no sense of responsibility. I want to train them to bust loose with this big pile of cash that I’ll leave them, and not only have an impact three generations down the line in our own family tree, but to impact the whole community in a fabulous way.

— Dave

Dear Dave,

An older friend of ours is going through a bad time right now, because he had a lengthy and expensive hospital stay and no insurance. Is it even possible to retire with no health insurance and be OK?

— Karen

Dear Karen,

It’s possible, but it’s very tough. You’re taking a huge risk if you allow yourself to be in that situation.

Medical bills are the No. 1 cause of bankruptcy in America. The second biggest cause is credit cards. If you don’t have an emergency fund or health insurance, then you’re a moving target. Murphy WILL hunt you down and eat you out of house and home.

Health insurance is something I strongly advise having, Karen, because it’s a basic part of any sound financial plan. You need it, because if you don’t have it you run the risk of having to crack open and scramble your nest egg if serious health issues arise.

— Dave

Dear Dave,

In your opinion what are the advantages and disadvantages of pre-paid tuition plans?

— Elliot

Dear Elliot,

I don’t like pre-paid tuition plans, and I don’t recommend them. The reason I don’t like pre-paid tuitions plans is that anytime you pre-pay something, your rate of return is only that of the rate of inflation.

On average, the inflation rate on tuition during the last 25 years has been about seven percent. In other words, you’re making seven percent on your investment. This is a bad rate of return when you consider that 96 percent of all growth stock mutual funds have averaged 12 percent or more over the last 25 years.

I recommend an Educational Savings Account (ESA). The ESA can be a mutual fund, which I also recommend, that grows tax-free if used for college. Plus, you can put as much as $2,000 per child, per year, into an ESA.

Stay away from pre-paid tuition plans. It’s like savings bonds versus mutual funds. You can do much, much better!

— Dave

For more financial advice plus special offers to our readers, please visit www.davesays.org or call 1-888-22-PEACE.

Filed under: City Business
By: HokeyPokey on 12/31/69 at 6:00

Look Dave, I can see you're really upset about this. I honestly think you ought to sit down calmly, take a stress pill, and think things over.

By: tennsurfr on 12/31/69 at 6:00

DaveAre you smoking some illegal stuff? Where can you find a safe, 10% return these days?Projecitons are for, at best, a flat 2008. The US economy is on life support with unsustainable debt. So,Specifically (no smoke, please) how does oen earn anywhere near 10% SAFELY??Steve

By: crackcitytn on 12/31/69 at 6:00

Maybe with a maintence free home, cars that are guareented not to breakdown for 30 yrs along with free food, health insurance and gas $100,000 might be enough. I wouldn't want Dave handling my moola. Maybe retirement to Dave is 85.

By: mccullochd on 12/31/69 at 6:00

Has anyone seen Dave's show on the Fox Business Channel? It's part of Comcast Digital cable. Has to be the most boring show in the entire world, its just him sitting at a desk answering phone calls. I really wonder if Dave ever paid back those companies that he owed money to when he went broke?

By: global_citizen on 12/31/69 at 6:00

I like Dave Ramsey's message to get out of debt and spend less than you make, but he has boiled his philosophy and his talking points down to such an iron clad mantra that he now often fails to see reality rather than theory.Regarding pre-paid college tuition, there are many reasons it's not a good idea. But his reason for opposing it is weak. He cites the rate of inflation for college tuition at 7%. Really? I question that and I question if it won't trend higher in the future.

By: OneTimer on 12/31/69 at 6:00

Dave gets criticized because he encourages people to change, change their way of thinking. People are uncomfortable with that.

By: tbench00 on 12/31/69 at 6:00

Regarding Tom's situation there is no mention of Social Security nor Tom's age.