The biggest retirement surge in history is occurring right now, as more than 4 million Americans are turning 65 each year between 2024 and 2027.
That is more than 11,000 Americans who reach the milestone retirement age every day — and it’s being called “Peak 65,” according to National Public Radio (NPR).
As Americans planning for retirement reach the understanding that they will end their working careers in massive numbers at a time of limited resources, their attention turns to how they can make the most of their own finances as the income to which they have become accustomed. stops.
Related: Dave Ramsey shares key insight on Social Security, Medicare
Radio host and bestselling personal finance author Dave Ramsey has a warning for Americans who might be planning to rely too much on Social Security during retirement.
“Social Security will replace a chunk of the income you made throughout your career based on your lifetime earnings,” Ramsey wrote.
In January 2026 the estimated average monthly Social Security retirement benefit is $2,071, according to the Social Security Administration (SSA).
“No matter how you slice it, that’s not a lot to live on (even with cost-of-living adjustments every year),” Ramsey wrote.
“Among the elderly, 12% of men and 15% of women rely on Social Security for 90% or more of their income,” he continued.
“Folks, these payments were always meant to replace some of your income in retirement — not all of it.”
Dave Ramsey urges Americans to use 401(k) plans
Ramsey strongly advises workers to take advantage of an employer-sponsored 401(k) plan if one is offered at work. He explains the main differences between two kinds.
A traditional 401(k) lets a person save for retirement using pre‑tax dollars, so the money goes in tax‑deferred. They will owe taxes later on — both on what they contributed and on any investment gains or employer matches — when they take the funds out.
A Roth 401(k) works the opposite way: A person contributes after‑tax money now, and in retirement, they can withdraw both their contributions and all the growth completely tax‑free.
“Many employers will offer a company match — that’s when your company offers to match a percentage of your retirement contributions in your 401(k),” Ramsey wrote. “Translation? Free money!”
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2026 401(k) contribution limits
- In 2026, the maximum amount one can contribute to a 401(k) each year is $24,500. (Source: Internal Revenue Service)
- Individuals who are 50 or older can make catch‑up contributions, raising their total allowable contribution to $32,500. (Source: Internal Revenue Service)
- Workers between ages 60 and 63 qualify for an additional catch‑up amount of $11,250, allowing them to contribute up to $35,750 in total. (Source: Internal Revenue Service)
- Withdrawals from a 401(k) generally aren’t permitted until a person reaches age 59-and-a-half. (Source: Internal Revenue Service)
- Taking money out before that age results in taxes and an additional early‑withdrawal penalty from the IRS. (Source: Internal Revenue Service)
Dave Ramsey stresses importance of IRAs
An IRA, or Individual Retirement Account, is a type of account designed to help Americans save for retirement while offering certain tax benefits.
It’s not an investment by itself; instead, it serves as a container that holds the investments one chooses and shields them from specific taxes.
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Ramsey discusses a few reasons why it is smart to open an IRA.
“If you have money in a retirement plan with a former employer — like a 401(k) — you can roll that money into an IRA so you have more control over your investment options,” Ramsey wrote. “IRAs are a great option for saving for retirement if you don’t have access to a workplace retirement plan.”
“If you need a tax-free investing account to go along with your tax-deferred 401(k) plan a Roth IRA fits the bill,” Ramsey continued. “An IRA works great alongside your workplace plan as an additional tax-advantaged account that allows you to save even more for retirement.”
Ramsey explains traditional IRAs and Roth IRAs
With a Roth IRA, a person contributes money that has already been taxed. Because the taxes are paid upfront, their investments can grow without additional tax, and their withdrawals in retirement are completely tax‑free, according to Ramsey.
With a traditional IRA, contributions may be tax-deductible. This allows a person to reduce their taxable income for the year they contribute. The size of the deduction depends on factors such as income, tax filing status, and whether one is covered by an employer-sponsored plan, such as a 401(k).
“But here’s the thing with traditional IRAs — since you’re not paying taxes on your contributions this year, you’ll have to pay taxes on that money and its growth when you take the money out in retirement (that’s why it’s called tax-deferred growth),” Ramsey wrote.
“And who knows what the tax rate will be when you retire?”
Taking money from an IRA without penalties
- Distributions allow money to be taken from an IRA without a 10% penalty when the account holder is at least age 59-and-a-half or when funds are moved between qualified plans. (Source: Ramsey Solutions)
- Traditional IRAs require annual withdrawals, known as required minimum distributions (RMDs), beginning at age 73. (Source: Ramsey Solutions)
- Roth IRAs do not require RMDs at any age. (Source: Ramsey Solutions)
- Withdrawals made before age 59-and-a-half from either traditional or Roth IRAs are generally subject to income taxes and a 10% early‑withdrawal penalty. (Source: Ramsey Solutions)
