Most American workers generally understand the necessity of saving for their future retirement years.
However, personal finance radio host and author Dave Ramsey put together a study that found that almost half of them are not saving at all. And among those who are putting money away, many are not saving enough.
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Some people believe that Social Security monthly paychecks will provide them with enough financial security on which to retire. Ramsey thinks that assumption is a big mistake.
Related: Dave Ramsey reveals the secret to getting the best mortgage rate
He suggests that people are wise when, during their working years, they take advantage of employer sponsored 401(k) plans.
He also highly recommends investing in IRAs — specifically Roth IRAs — because of favorable tax advantages that they feature.
Ramsey has some straightforward advice for people who are confronting the challenge of saving and investing for retirement.
A man in retirement is seen teeing off toward the sun on a golf course.
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Dave Ramsey bluntly identifies a retirement savings problem
Ramsey Solutions studied the current state of retirement savings in the U.S. and found that people do have it on their minds even if they aren’t saving enough.
The company’s report found that 49% of Americans cited saving money as one of their New Year’s resolutions.
But the personal finance coach explained his concern that simply thinking about it is not enough.
“That’s right up there with eating healthier and getting more exercise as the most popular resolutions,” Ramsey wrote. “But wishing without action is just a pipe dream. You have to do something different if you want your habits — and your future — to change!”
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Ramsey did temper his warning for Americans by explaining that retirement savings might be easier than many people think.
He suggested three steps people can take to turn their good intentions into realities that pay off.
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Ramsey explains three steps for Americans on retirement planning
Ramsey believes identifying a small number of simple specifics to focus on can help Americans get started with putting a retirement savings plan into action.
First, the Ramsey Show host recommends that workers set a goal for their savings. He suggested that one takes the time to imagine their ideal retirement future.
He asks whether that means a person imagines themselves on a beach having a drink or spending time with kids or grandkids.
“When you can see your retirement dreams in high-definition, you’ll be more focused and ready to do what it takes,” Ramsey wrote.
The second step Ramsey discusses for workers is to make sure they are participating in an employer sponsored 401(k).
Then he mentions accompanying that investment tool with a Roth IRA, explaining that it is a retirement account that allows people to pay the taxes on the value they contribute to it up front.
Importantly, Ramsey says workers should try to save 15% of their income in these accounts. He recommends investing in four types of mutual funds — growth and income, growth, aggressive growth and international.
Finally, Ramsey offers some tips on ways people can reach beyond that 15% when they are financially ready.
This primarily involves maxing out their 401(k) and Roth IRA.
For 2025, the standard contribution limit for a 401(k) is $23,500. The catch-up contribution limit for people 50 years old and older is $7,500. For those aged 60 to 63, the special catch-up contribution limit increases to $11,500.
The standard contribution limit for IRAs is $7,000 for people under 50 years old. For those 50 and older, a catch-up contribution limit also exists of $1,000.
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