Radio host and bestselling personal finance author Dave Ramsey is warning Americans about a major strategy regarding saving for retirement with 401(k) plans and IRAs, while paying close attention to Social Security.
First, Ramsey has a key recommendation for workers to consider before they start contributing to retirement accounts.
“You’re better off if you hold off on investing until you’re debt-free and have 3-6 months of expenses saved in your emergency fund,” Ramsey wrote.
“Why? Because your income is your biggest wealth-building tool. If you’re going to invest successfully, you don’t want your income tied up in monthly consumer debt payments,” he continued. “And an emergency fund with 3-6 months of expenses removes the temptation to dip into your retirement accounts when unexpected expenses pop up.”
Next, Ramsey encourages people to invest 15% of their income in 401(k)s and IRAs.
“A 15% savings rate gives you the consistency and flexibility you need,” Ramsey wrote. “And it makes it easier for you to buy and hold investments while you deal with everything else on your plate (like emergencies and unexpected expenses).”
“The main reason we recommend investing 15% for retirement is to help you stick with the Ramsey plan. That way, you can stay on track to build wealth, live your life, and give generously.”
Social Security Administration weighs in on retirement income
When one combines the projections for the two major Social Security trust funds into one fund, there is enough money to pay full benefits only until the third quarter of 2034, according to the Social Security Administration (SSA).
“At that time, the projected fund’s reserves would become depleted and continuing combined fund income would be sufficient to pay 83 percent of scheduled benefits,” wrote the SSA.
Ramsey offers some thoughts about the health of the Social Security program and why investing 15% of one’s income is a smart strategy.
“Listen. Even if by some miracle Social Security doesn’t kick the bucket, it was never designed to replace your income in retirement,” Ramsey wrote.
As of April 2026, the average Social Security benefit for retired workers was $2,033 a month. That’s only $24,396 a year, according to the SSA.
For some perspective, the federal poverty level for a family of two in 2026 (a person and their spouse) is $21,640, reported the U.S. Department of Health and Human Services (HHS).
“We’re not trying to scare you,” Ramsey wrote. “We just want you to know why it’s so important to invest 15% and build a nest egg that’s large enough to help you retire with confidence.”
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Dave Ramsey suggests simple formula for 401(k), IRA priorities
When one is unsure where to invest, they should follow a simple hierarchy: Prioritize 401(k) employer matching first, Roth second, and traditional accounts last, Ramsey emphasized.
“The first place to start investing is through your workplace retirement plan, especially if they offer a company match,” Ramsey wrote. “That’s free money, folks! And when someone offers you free money, you take it.”
“And if your employer offers a Roth 401(k) or Roth 403(b), even better,” Ramsey continued. “If you like your investment options inside your workplace plan, you can invest the entire 15% of your income there and voila — you’re done.”
After contributing enough to capture their full employer match, Ramsey says investors should aim to fully fund a Roth IRA — and an additional one for a spouse, if married.
“After contributing enough to capture their full employer match, investors should aim to fully fund a Roth IRA — and an additional one for a spouse, if married,” Ramsey wrote.
Ramsey also encourages people to set up automatic withdrawals for retirement account savings.
“Whether you invest through your workplace plan or through an IRA, set up your account for automatic withdrawals (preferably as a percentage of your salary, not a flat amount),” Ramsey wrote.
“It’s best if your money goes straight from your paycheck to your retirement account,” he added. “Then you won’t be tempted to skip investing to spend that money on vacation plans, football tickets or that Facebook Marketplace ‘deal’ on a jet ski you absolutely do not need right now.”
Related: Fidelity’s data makes Suze Orman’s 401(k) warning hard to ignore
