This article looks at the 15 best places to retire for those planning to follow Dave Ramsey’s 8% withdrawal rate. You may skip our detailed analysis on the 8% withdrawal rate and jump to 5 Best Places to Retire for Those Planning to Follow Dave Ramsey’s 8% Withdrawal Rate.
What Is Dave Ramsey’s 8% Withdrawal Rate?
American radio personality and well-known financial guru Dave Ramsey has been helping millions of people get out of debt over the years. However, some of his advice has been stirring up quite a controversy, and many financial advisors advise exercising caution when following them.
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One piece of advice the guru is quite vocal about is moving away from the 4% safe withdrawal rate. The 4% rule is a popular withdrawal strategy for retirement that has been used as a rule of thumb by retirees for many years now. According to this rule, a retiree can withdraw 4% of their portfolio’s value in the first year of retirement. After the first year, they can withdraw the same dollar amount, adjusted for inflation, and every year thereafter. The rule assumes a reasonable rate of return on investment where withdrawals primarily consist of interests and dividends.
Coming back to financial guru Dave Ramsey, the man suggests that the rule is overly conservative.
“It’s too low! It’s not realistic. You do not need to live on 4% of your money for your nest egg to survive”.
So what does he suggest instead? A surprising 8% withdrawal rate. Ramsey states that the 8% withdrawal rate is quite sustainable provided one is 100% invested in equities.
“If you’re making 12[%] in good mutual funds, and the S&P has averaged 11.8[%], and if inflation for the last 80 years has averaged 4% … that leaves you 8[%]…If you want to be a little bit conservative, 7[%], but sure not 5[%] or 3[%]”.
According to Ramsey, an aggressive portfolio comprising equities and with a 3% inflation rate factored in can easily help retirees withdraw at an 8% high retirement withdrawal rate while still allowing their investments to grow.
However, many financial advisors challenge the notion. They argue that such a high withdrawal rate is not viable given the unpredictability of market returns and also because of the sequence of returns risk. The sequence of returns risk, particularly relevant in retirement income planning, refers to the detrimental effect of receiving low or negative investment returns—whether early or late in retirement—on the sustainability of one’s retirement portfolio.
While many financial advisors would advise against this strategy, Forbes says withdrawing at an 8% rate may be realistic. By choosing a good closed-end fund (CEF) offering a steady 8% yield, and careful planning, withdrawing at this rate is possible. However, while an 8% withdrawal rate can work under the right conditions, it carries risks that require careful management of both income sources and market volatility.
In essence, even though Ramsey’s proposed portfolio can yield decent returns, Money Guy points out that the Ramsey portfolio has not consistently outperformed the S&P 500 (as noted by Dave Ramsey). Moreover, they also suggest that a high-risk strategy of 100% equities is not appropriate for retirees who need a stable source of income. This is why a diversified portfolio and risk management are important for them.
In conclusion, the 8% withdrawal rate is not for everyone to follow. Depending on your financial situation, you could follow the 8% rule if you have a large nest egg and can safely withdraw money for many years to come. It may be suitable for aggressive investors with a high risk tolerance, or younger retirees with a long time horizon, but it is certainly not for everyone. According to the Charles Schwab Corporation (NYSE:SCHW), when it comes to safe withdrawal strategies, tapping assets in the right order in retirement can make a big difference. They recommend tapping into RMDs first to avoid penalties, tapping intro interests and dividends next to preserve investments, and then cashing out maturing bonds and Certificates of Deposits.
The Charles Schwab Corporation (NYSE:SCHW) reported its second-quarter results in July 2024. It beat earnings expectations with a reported EPS of $0.73, while expectations were $0.717. The company reported a slight increase in revenues, rising 1% year-over-year to $4.69 billion driven by growth in client assets and equity markets. The company maintained a strong pre-tax margin of 37.2%, with a CFO noting record asset management fees and effective expense management.
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Methodology
To compile our list of 15 best places to retire for those following Dave Ramsey’s 8% withdrawal rate, we began by shortlisting US cities offering a high quality of life, reasonable cost of living, and modern amenities. These features can enhance their overall retirement experience, allowing them to enjoy their larger withdrawals fully.
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Here are the 15 best places to retire for those following Dave Ramsey’s 8% withdrawal rate:
15. Salt Lake City, Utah
Insider Monkey Score: 8
IM Cost of Living Index: 122
Livability Score: 75
This modern city set minutes away from some spectacular mountains and abundant snow is one of the best places to retire for those following Dave Ramsey’s 8% withdrawal rate. Those with large nest eggs can enjoy a rich lifestyle here without stretching their budgets thin. Retirees love it for its breathtaking backdrop and serene atmosphere, abundant outdoor activities, and access to high-quality healthcare. Owing to its large number of parks, sports leagues, trails, and recreational facilities, it’s one of the healthiest cities one can retire in.
14. Burlington, Vermont
Insider Monkey Score: 10
IM Cost of Living Index: 114
Livability Score: 74
One of the top retirement cities in Vermont happens to be Burlington. This mountain city set on the shores of Lake Champlain offers a wealth of outdoor activities for seniors, allowing them to live an active, high quality of life. Its vibrant farmers’ markets and agriculture programs are evidence of its commitment to healthy eating, while its strong healthcare system further reinforces why one should choose the city for their golden years.
13. Austin, Texas
Insider Monkey Score: 11
IM Cost of Living Index: 130
Livability Score: 83
Austin may have living expenses 30% higher than the national average, but if you have a large nest egg and withdraw around 8%, it’s possible to live a good lifestyle here in the city. From biking trails and live music to world-class museums and boutique shopping, Austin is packed with all the amenities a retiree would need for a fulfilling and active retirement.
12. Boise, Idaho
Insider Monkey Score: 11
IM Cost of Living Index: 116
Livability Score: 76
Another city revered for its high quality of life and healthiness is Boise. Indeed, Boise is one of the top retirement cities to choose from for those with large nest eggs. The cost of living here is 16% higher than the national average, but the facilities and amenities justify this high cost of living. The city is embraced by beautiful landscapes such as the Boise River Greenbelt and nearby foothills, giving retirees the option to pursue the outdoors. Quality medical services, wellness programs, and other senior services make it a well-rounded retirement destination.
11. Charleston, South Carolina
Insider Monkey Score: 14
IM Cost of Living Index: 111.5
Livability Score: 77
Those looking for an urban retirement living experience in the beautiful state of South Carolina can go for the charming city of Charleston. Blessed with ocean breezes, natural beauty, and outdoor recreation, the city is an ideal place for seniors to spend their golden years. Its coastal setting, historic architecture, and Southern hospitality offer an extraordinary retirement experience.
10. Scottsdale, Arizona
Insider Monkey Score: 14
IM Cost of Living Index: 121
Livability Score: 82
Home to a thriving arts scene, quality healthcare, and abundant recreational opportunities, Scottsdale is another prime candidate for those who have enough to withdraw a decent amount from their nest eggs. Living expenses in the city are 21% higher than the national average, and the livability score is a solid 82.
9. Falls Church, Virginia
Insider Monkey Score: 15
IM Cost of Living Index: 125
Livability Score: 88
If you want all the amenities that Washington has to offer but don’t want to sacrifice small-town living, Falls Church could be the perfect choice for you. With its proximity to D.C., it boasts numerous parks, cultural attractions, and high-quality medical facilities, making it an excellent option for seniors considering it as their forever home
8. Green Bay, Wisconsin
Insider Monkey Score: 16
IM Cost of Living Index: 88.6
Livability Score: 71
The most affordable option on our list, retiring in Green Bay means retirees can enjoy having a large budget to spend on food, healthcare, travel, and most importantly, entertainment. Promising a robust healthcare system, a rich cultural scene, and abundant parks and trails, Green Bay allows retirees to have the most bang for their buck whilst enjoying life to the fullest.
7. Lexington, Massachusetts
Insider Monkey Score: 16
IM Cost of Living Index: 146
Livability Score: 92
Known to be the birthplace of American liberty, Lexington promises retirees a high quality of life along with rich historical charm, quality healthcare, and modern amenities. Besides overflowing with history, Lexington promises retirees a wonderful New England atmosphere, beautiful walking trails, and well-preserved parks.
6. Monroe North, Washington
Insider Monkey Score: 16
IM Cost of Living Index: 130
Livability Score: 91
A hidden gem to consider in Washington, Monroe offers retirees a tranquil lifestyle brimming with natural beauty and the great outdoors. It is set against the foothills of the scenic Cascade Mountains on the banks of the Skykomish River, offering a breathtaking backdrop, boasting quality healthcare services, and also housing a tight-knit community for those who look forward to social engagement.
5. Sarasota, Florida
Insider Monkey Score: 17
IM Cost of Living Index: 109.7
Livability Score: 80
There is something about the Sunshine State of Florida that retirees can’t get enough of, especially in the city of Sarasota. It’s likely the breathtaking coastal scenery and the wealth of recreational opportunities, combined with a vibrant lifestyle and top-notch amenities. For those who wish to retire in Florida, Sarasota is one gem of a place to be.
4. Portland, Maine
Insider Monkey Score: 19
IM Cost of Living Index: 111.5
Livability Score: 85
This historic seacoast town has always been a retiree favorite thanks to its award-winning restaurants, working waterfront, cultural richness, and quality amenities. The city’s stunning waterfront, with its picturesque lighthouses and historic architecture, provides a scenic backdrop for retirees seeking a relaxed lifestyle. Portland also boasts an active arts scene, top-tier dining with fresh seafood, and plenty of local markets.
3. Savannah, Georgia
Insider Monkey Score: 21
IM Cost of Living Index: 93.6
Livability Score: 81
Boasting both affordability and a high-quality lifestyle, Savannah in Georgia suits those looking for endless opportunities for entertainment and cultural engagement. This coastal city is revered for its picturesque oak-lined streets, historic architecture, and stunning riverfront, offering retirees a scenic and leisurely environment that they deserve.
2. Ann Arbor, Michigan
Insider Monkey Score: 24
IM Cost of Living Index: 107.4
Livability Score: 89
Ann Arbor is an indisputably amazing retirement destination for seniors to consider for their golden years. This bustling university town and culinary hotspot boasts a walkable downtown, a vibrant arts and culture scene, and access to world-class healthcare facilities. Home to the University of Michigan, retirees also have the chance to engage in lifelong learning.
1. Cary, North Carolina
Insider Monkey Score: 26
IM Cost of Living Index: 105
Livability Score: 90
Based on our methodology, the best place to retire for those following Dave Ramsey’s 8% withdrawal rate is Cary, North Carolina. Retiring to a city like Cary where living expenses aren’t as high as many other cities on our list means retirees can stretch their savings further, possibly even splurge if they want, and enjoy a high quality of life. Excellent healthcare, a strong community, and an active lifestyle make Cary a wonderful destination to spend one’s golden years.
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Disclosure: None. This article was originally published on Insider Monkey.