Our House Burned Down—Should We Use Retirement to Rebuild?

Summary

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Episode Overview

Podcast: Ramsey Everyday Millionaires
Episode: Our House Burned Down—Should We Use Retirement to Rebuild?
Date: December 12, 2025
Hosts: Dave Ramsey, George Kamel
Main Theme:
This episode centers around a listener, Randy from Los Angeles, whose home was destroyed in the January LA fires. The discussion explores the financial decisions and options when faced with a massive loss—specifically, whether to tap into retirement savings to rebuild, or leverage other resources. Beyond Randy’s personal scenario, the hosts share broader principles about insurance, investing, and resilience.

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Key Discussion Points & Insights

1. Caller’s Situation: House Lost in the LA Fires

• Randy lost his home (and 6,500 others in the community) in the January LA fires in Altadena.

• He's now considering how to rebuild. Insurance will cover $1.1 million of the $1.6 million rebuild cost, with an additional potential $200k from a SoCal Edison lawsuit (uncertain).

• This leaves a $400,000 gap for rebuilding.

  "Luckily we had enough insurance... we're about to rebuild for 1.6 million. Insurance will probably cover about 1.1."
  — Randy (00:47)

2. Evaluating Options For Covering the Gap

• Randy has a $631k mortgage, could sell the property for about $800k, but would lose significant equity.

• Options: Sell and walk away with ~$150k, rebuild and go into more debt, or use retirement funds.

  "That's a rock and a hard place if I've ever seen one."
  — Dave Ramsey (01:57)

• Randy prefers to stay and be part of the “Altadena Strong” community rebuilding effort.

3. Financial Picture

• Randy is 63, with $2.7 million in retirement (401k, deferred comp, IRA).
• $300,000 in liquid personal property payout (after the fire).
• Combined household income of $615,000 ($550k Randy, $65k spouse).
• Emergency fund of about $25,000 (in addition to the $300k).

4. Strategic Advice: Protect Retirement, Maximize Cash Flow

• Don’t rush to drain retirement. Pulling $400k now means losing future tax-free growth and paying taxes on the withdrawal.

• Use liquid cash first (the $300k payout).

• Leverage high income and rent assistance to save aggressively as insurance pays living expenses during the rebuilding period.

  "I would use any liquid cash I have because number one, you're not going to unplug the growth. Number two, you're not going to pay taxes on that."
  — Dave Ramsey (04:00)

• Stack cash: Live lean and save $20-25k/month for 12–18 months (the rebuild timeline). This should nearly cover the $400k gap without harming retirement.

  "Put 20k a month in a high yield savings account for 18 months. You close to the amount you need..."
  — Dave Ramsey (05:55)

• Only use as little retirement as necessary, if still needed after maximizing cash and savings effort.

5. Broader Lessons: Insurance & Community

• Importance of having robust insurance coverage, understanding policies, and reshop annually.

• Know what’s covered in your state—homeowner’s insurance is complex, and natural disasters (like wildfires or floods) stress-test policies.

  "Just go, well whatever happens, insurance will cover it. No, no, no. You got to read the fine print..."
  — Dave Ramsey (07:44)

• Emotional recovery: Rebuilding is not just financial—community matters (“Altadena Strong”).

• The risk of assuming insurance “has you covered”—be proactive, not passive.

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Notable Quotes & Memorable Moments

• On the emotional impact:

  “It was horrible… But now we’re in a kind of an excitement mode because we’re rebuilding.”
  — Randy (00:31)

• On the value of keeping retirement funds invested:

  “That money’s going to double every seven years… at 70, what you're really giving up is not the 400 plus taxes. What you're really giving up is 800,000 because you’re unplugging all that growth.”
  — Dave Ramsey (03:55)

  "Leave your retirement alone. And then thank us later when you retire with $5 million."
  — Dave Ramsey (06:23)

• On insurance literacy:

  "Just doing a little bit of research can save you a lot of heartache, because if it's not covered, you need to know you might be on the hook if this event happens."
  — Dave Ramsey (07:59)

• On community and resilience:

  "I love the idea that you want to be a part of Altadena Strong… the community rising up together and rebuilding. That's pretty special stuff."
  — George Kamel (06:45)

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Timestamps for Important Segments

• 00:17 — Randy shares his story; house lost in fire
• 00:47 — Outlining the insurance & rebuild cost gap
• 01:57 — Evaluating “rock and a hard place” options
• 02:18 — Randy’s age, retirement, and assets breakdown
• 03:55 — Dave on the true cost of pulling from retirement
• 04:30 — Randy’s household income and insurance rent coverage
• 05:31 — Debts gone except mortgage; leveraging high income for rebuild fund
• 06:23 — Dave frames the win: avoid tapping retirement, compound future wealth
• 07:44 — Importance of knowing your insurance coverage
• 08:24 — Emotional weight of disaster, insurance for peace of mind

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Takeaway Principles

• Prioritize liquid funds and current cash flow before raiding retirement savings.
• Maximize time when living expenses are covered (insurance rent), aggressively save for approaching big costs.
• Understand your insurance coverage thoroughly; don’t assume everything is covered.
• Community matters: Financial recovery is easier when the emotional and social backbone is strong.
• Adversity can be managed through discipline, planning, and resilience.

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Episode Tone

Empathetic, practical, and empowering. Dave and George maintained a supportive, slightly humorous, and deeply rational tone, balancing financial logic with an understanding of the emotional trauma involved in major loss.

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Transcript

[Dave Ramsey]

Foreign.

[Podcast Announcer]

This episode is brought to you by SmartVestor. Connect with an investing pro near you at RamseySolutions.com SmartVestor all right, let's go.

[George Kamel]

To Randy in Los Angeles. Randy, how can we help today?

[Randy (Caller)]

Well, first of all, thank you for taking my call. Very excited to hear your advice and talk to you guys. So our house got caught up in the January LA fires and burned to the ground.

[George Kamel]

Oh, no.

[Randy (Caller)]

We're.

[George Kamel]

Where. Where were you?

[Randy (Caller)]

Yeah, it was horrible. So in Altadena.

[George Kamel]

Yeah.

[Randy (Caller)]

The whole community. 6,500 homes got destroyed.

[George Kamel]

Yeah.

[Randy (Caller)]

Very devastating. But now we're in a kind of an excitement mode because we're rebuilding. So we're, we're moving past that.

[Dave Ramsey]

Okay.

[Randy (Caller)]

Luckily we had enough insurance. We have a lot. We have a lawsuit with SoCal Edison that's two or three years down the road. But we're, we're about to rebuild for 1.6 million. Insurance will probably cover about 1.1. SoCal. I decided we'll probably get about 200k but you can't count on that. So I'm wondering if I should drop my retirement to cover the Delta or looking at other options because it's probably about a 400k delta to what we have for mature. Yeah.

[Dave Ramsey]

Was there a mortgage?

[Randy (Caller)]

Yeah, the mortgage is about 631. We could probably sell the property for about 800k but we lost 500k in equity and rebuilding for 1.6. The property value is going to be, you know, really big in four to five years. So I think it was maybe financial decision. Yeah, maybe. Right.

[Dave Ramsey]

I mean, so is the option to sell and walk away with 150 grand and go elsewhere or we rebuild and take on an extra 400 grand in debt or rob our retirement?

[Randy (Caller)]

Yes. Basically those are the options.

[Dave Ramsey]

That's a rock and a hard place if I've ever seen one. How badly are you wanting to rebuild versus just selling for what you can get for it?

[Randy (Caller)]

Well, we're pretty into the Altadena, strong rebuild mentality. I think my retirement has enough to cover that. Just like to get your opinion, how.

[George Kamel]

Much do you have in retirement?

[Randy (Caller)]

About 2.7.

[George Kamel]

How old are you?

[Randy (Caller)]

63.

[Dave Ramsey]

Okay. You said it's all taxable.

[Randy (Caller)]

Yeah, it's in a 401k deferred comp.

[Dave Ramsey]

Okay.

[Randy (Caller)]

And Ira.

[Dave Ramsey]

Yeah, got it. So you can withdraw without penalty. You'll just owe taxes on the amount you withdraw.

[Randy (Caller)]

Correct.

[Dave Ramsey]

So the question is, if you deplete 2.7 down to 2.3, will you still be able to retire? With dignity when you want to. Does that change your retirement plans?

[Randy (Caller)]

Yeah, I probably have to work another year and a half to do this.

[Dave Ramsey]

Okay, so there's the trade off. I'm willing to rebuild and eat the cost of withdrawing that. Paying the taxes, losing the future growth of that 400,000 in order to stay where I'm at and rebuild and not have a mortgage.

[George Kamel]

Am I understanding that you'll still have.

[Dave Ramsey]

The 631 mortgage now?

[Randy (Caller)]

I'll still have the 631 mortgage on top of the rebuild.

[George Kamel]

Okay, I misunderstood. I'm sorry. Okay, so the 400.

[Randy (Caller)]

I think I made that clear.

[George Kamel]

Gotcha.

[Dave Ramsey]

Okay, how much do you have in savings now?

[Randy (Caller)]

In savings? About 300k.

[Dave Ramsey]

Oh, nice. What's the 300k for?

[Randy (Caller)]

So the 300k was part of the personal property payout. So I don't know if I consider that savings, but you know what I.

[Dave Ramsey]

Mean, it's liquid cash you have access to. Instead of that, you could actually use your retirement.

[Randy (Caller)]

Yeah, yeah, yeah, absolutely.

[Dave Ramsey]

Why not take like 250? You have an emergency fund or is that part of the 300k?

[Randy (Caller)]

Yeah, we have about 25k in an.

[George Kamel]

Emergency fund in addition to the 300.

[Randy (Caller)]

Yes.

[Dave Ramsey]

So why not use the 300 and only take 100 from your retirement?

[George Kamel]

This is what I'm thinking.

[Randy (Caller)]

That's definitely an option.

[Dave Ramsey]

It would be the only option if I'm going to do this. Because if you, if you pop in 300 grand, you would have taken or 400 grand into an investment calculator, that money's going to double every seven years. So at 70, what you're really giving up is not the 400 plus taxes. What you're really giving up is 800,000 because you're unplugging all of that growth too. So that's the part I want you to think about. And for that reason, I would use any liquid cash I have because number one, you're not going to unplug the growth. Number two, you're not going to pay taxes on that. Okay, and how much do you guys.

[Randy (Caller)]

I make 550. My wife makes 65.

[Dave Ramsey]

Oh, incredible. I mean you could probably cash flow this thing. How long is it going to take to rebuild?

[Randy (Caller)]

Well, here's the thing. We've got like 300k in Ali, which means that they'll pay our living expenses outside up to 300k. So we could probably delay the build, keep living.

[Dave Ramsey]

So they'll pay for you to rent. You have rent free living until the house is done.

[Randy (Caller)]

Correct.

[Dave Ramsey]

I would do that and stack all of your income.

[George Kamel]

Dude, I would just kept getting better and better. Randy.

[Dave Ramsey]

I wouldn't touch any of the money. I would. If you guys are bringing in, I don't know how much are you bringing in a month? What's your take home pay right now?

[Randy (Caller)]

About 30.

[Dave Ramsey]

30Amonth is your take home. I guess California taxes make you still poor somehow. Yeah. So could you live off of, you know, 5 and put the other 25 in savings?

[Randy (Caller)]

We could probably live off of 10.

[George Kamel]

I was going to say the 5, George. Like, what are you talking about?

[Dave Ramsey]

Well, if he's living rent free, he's.

[George Kamel]

Still in LA though, man.

[Dave Ramsey]

I'm, I'm just saying. All right. You guys have no other debt other than the mortgage?

[Randy (Caller)]

Just the mortgage. We paid off 170k in, in student loan fees that I didn't know was accruing interest because I didn't take them out and I didn't understand how they worked. But you guys show taught me about subsidized, unsubsidized. So I looked into it. I'm like, whoa, we're getting into, you know, even though we didn't have to pay, we were stacking up interest, so we paid that off.

[Dave Ramsey]

Okay, good.

[Randy (Caller)]

With the.

[Dave Ramsey]

Well, I'm just saying, you know, you put 20k a month in a high yield savings account for 18 months. You close to the amount you need that delta.

[Randy (Caller)]

Okay.

[Dave Ramsey]

And I imagine It'll take about 18 months to rebuild, right?

[Randy (Caller)]

Yeah, anywhere from 12 to 14 months is what we're getting quoted. And we're going to start probably in March.

[Dave Ramsey]

Okay. Then this, this is my game plan. I'm going to stack so much cash with my future income and then any gap remaining, I'm going to take out that 300 from that personal property payout.

[George Kamel]

You got and leave your retirement alone.

[Dave Ramsey]

And then thank us later when you retire with $5 million.

[George Kamel]

That's right. So you're not going to hurt your compound interest and you're not going to get taxed. So don't even think retirement, you got.

[Dave Ramsey]

Two sw double win situation, especially with your income. Once you, you buried the lead there going, well, we make, you know, 30k a month. That really helps the situation. Yeah.

[Randy (Caller)]

Yeah. All right, Randy, I appreciate. Yeah, I'm feeling pretty good.

[Dave Ramsey]

Sorry for what you've been through.

[George Kamel]

You should and, and my goodness, just so proud of you. And I love the idea that you want to be a part of Altadena Strong. And there's something about that, the community rising up together and Rebuilding. That's pretty special stuff. So thanks for sharing a bit of your journey with us. That's. That's. That's crazy stuff, George. You know, I. I was out there in LA about a month ago, went out for a football game with my oldest son, and we drove near, certainly the Malibu area, just because I wanted to see it with my own eyes. And that is not a great situation for a lot of people. Randy's got probably one of the better.

[Dave Ramsey]

Situations, better case scenario.

[George Kamel]

Yeah, there's some pretty tough stuff going out there, and I bring that up to say you talk a lot about insurance, you know, and I think it makes a lot of sense right now for you to give just a fundamental, all right, acts of God or acts of nature, whatever you want to call them, they happen at times, and it can absolutely, you know, wipe out people.

[Dave Ramsey]

Just go, well, whatever happens, insurance will cover it. No, no, no. You got to read the fine print to see what your insurance will and will not cover, especially depending on your state. And so that's something to look into. And so I reshop every year with my independent insurance broker, and she tells me, hey, this is exactly what it will cover, what it won't cover. Do you want to, you know, upgrade and get this covered as well? And I go, oh, sweet, I didn't know that. And so just doing a little bit of research can save you a lot of heartache, because if it's not covered, you need to know you might be on the hook if this event happens. Yeah. And so in a state like Florida where flooding is very much possible, they're not going to cover a flood happening. And so people have been devastated when they lose it, and they go, cool, where's my check? And they go, there's no check. Yeah, this isn't covered.

[George Kamel]

It's a great point. You know, I remember watching that coverage that was the most surreal thing I've ever seen, where you could see hot coals literally flying through the air and threatening homes. And I remember thinking, just because of the nature of the work we do, how many of these people, like, once, you know, your home is gone, that's got to be so. I don't even know. Don't even know how to understand the.

[Dave Ramsey]

Grief process on that.

[George Kamel]

Yeah.

[Dave Ramsey]

Just the shock without the financial implication. Right.

[George Kamel]

But I remember thinking, I hope they're insured, because one of the. One of the few things that you could take away from something like that, if you go, well, this is the worst case scenario. But here's what I know, because I'M like George because I know what my insurance covers. I can at least say, hey, I have some clarity.

[Dave Ramsey]

Yeah.

[George Kamel]

And plus confusion.

[Dave Ramsey]

Yeah.

[George Kamel]

Not fun.

[Dave Ramsey]

You got to keep up with what the market rate is to build that house today. That's the part you need to keep up with on your home insurance.

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