A third of Americans will learn the hard way about Social Security.
That’s according to finance guru, Dave Ramsey, who warns that Social Security alone isn’t enough, and instead recommends maximizing 401(k) and IRA savings.
By 2034, he says, Social Security reserves are expected to run out of money if nothing changes. “Depending on what Congress does (or doesn’t do), future retirees may need to prepare for the possibility of reduced benefits, and workers may see increased Social Security taxes,” Ramsey added.
Bottom line – we cannot rely on the government to take care of us in retirement. And to be honest, you don’t want to put your retirement hopes and dreams in the hands of the government. Look, if you get benefits when you retire, great. But if your goal is to make Social Security your main source of income, you’re really setting yourself up for disaster.
At the moment, more than four million Americans are turning 65 between now and 2027. “This is more than 11,000 people hit this milestone every single day. The extra money of the program is expected to end in less than ten years,” according to NPR.
This also means that when more people retire, they will be greeted with limited resources from Social Security. With this being the case, many of us need to figure out how to make the most of our finances to have a safe and healthy retirement.
Mom your contributions to retirement accounts if you can.
Tax-advantaged accounts – 401(k)s, IRAs, health savings accounts, etc. – are good ways to save and invest for the future. In many cases, contributions to these accounts can help reduce your taxable income for the 2025 tax season. You have until April 15, 2026, to contribute the maximum amount to apply to your 2025 taxes.
Also, if your employer offers a matching program, contribute enough to receive the highest possible employer match. You can also top up your health savings account if you have one. Let’s say that your employer agrees up to 6% of your salary; maximize that.
Consider this. Let’s say you earn $100,000 a year and that your employer will match 50% of your contributions up to 5% of your salary or $5,000. With your contribution and the employer’s match, $7,500 is saved each year. Over 30 to 40 years from now, you’ll have a solid balance.
Put extra money into retirement instead of spending it on anything.
You should be setting aside 15% of your household income for retirement if you can, Ramsey said.
He recommends investing 15% of the family’s gross income in tax-advantaged retirement accounts (401(k)s, Roth IRAs) to build wealth, with debt under control and an emergency fund established.
“An example from Ramsey Solutions highlights how people under 40 can save $1 million for retirement. If someone is making $80,000 a year, they would need to invest $1,000 a month to reach that 15%. Putting in “good growth stock mutual funds” can bring more than $1.5 million in a retirement nest egg by the age of $ 62 million added Benzinga.com.
For most of us, getting out of debt is easier said than done.
According to Dave Ramsey, focus on the smaller balances first. This way, you free up more cash for the heavier debt. Then, once the smaller debts are paid off, you now have new cash flow to tap into to make extra payments on higher interest balances.
Then, as noted by Ramsey Solutions, “Make minimum payments on all but the smallest debts—throw as much money as you can on that one. Once that debt is gone, take its payment and apply it to the next smallest debt (while continuing to make minimum payments on your other debts).”
Then, repeat this over and over again until you drive down your overall debt.
Or, you can just make minimum payments on all your debt and put part of the cost with the most interest. Or three, you can take out a consolidation loan, write off all outstanding debt, and have one balance. Not only can this allow you to manage your debt a bit better, but it can also allow you to put extra funds into an emergency account.
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