Dave Ramsey Says Not To Trust Social Security, Follow These Retirement Plans Instead
Written by
Nicole Spector
Edited by
Gary Dudak
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Dave Ramsey is a man of strong opinions, especially when it comes to retirement. The personal finance guru is famously untrusting of Social Security, and encourages Americans not to rely on it as a principal source of income during their golden years.
“Social Security benefits were never intended to be the only source of income for Americans in retirement,” a post on Ramsey’s site, Ramsey Solutions, reads. “It was always meant to supplement your retirement income — like how a side of french fries is meant to ‘supplement’ your cheeseburger.”
The post continues, “Unfortunately, a lot of folks never got the memo. The Social Security Administration reports that 1 out of 4 Americans who are 65 years old or older rely on Social Security for 90% of their income in retirement. Listen, if your plan is to depend on the government to help you retire with dignity, then you need a new plan!”
What exactly should one’s “new plan” be? According to Ramsey, an ironclad retirement plan is made up of the following.
Set Clear Goals
A retirement plan is nothing without a vision. As early as possible, one should have clear goals set around what they want their retirement to look like.
“What is your retirement dream? Do you want to ride around the country in an RV? Buy a house on a lake and go fishing every day? Spend a bunch of time with your grandkids?” asks a post on Ramsey Solutions. “Whatever your dreams and goals are, having a high-definition picture in your head of what you want your retirement to look like will keep you motivated when you might feel like taking your foot off the gas.”
Do the Math
On Ramsey Solutions, a post states that only “about half (48%) of workers have actually tried to figure out how much money they’ll need to save by the time they retire. That’s not good enough!”
The site touts a free retirement calculator that can help you figure out how much you need to save for your ideal retirement.
Save and Invest 15% of Your Income
Planning for retirement shouldn’t be a last minute thing, but something you do throughout your working years. Ramsey recommends investing 15% of your income to help fund your retirement. This may sound like an overly ambitious plan, but Ramsey has a realistic way for people to do it.
“First, hold off on investing until you’re debt-free and have 3-6 months of expenses saved in your emergency fund,” a post on Ramsey Solutions says. “Your income is your biggest wealth-building tool. So, to invest successfully, it can’t be tied up in monthly debt payments. And your emergency fund removes the temptation to ‘borrow’ from your retirement accounts when unexpected expenses pop up.”
Invest Big in a 401(k) and Fund a Roth IRA
Additionally, the post advises folks to remember this simple formula: “Match beats Roth beats traditional. With that in mind, you can reach your 15% goal by following these three super easy steps:
1. Invest up to the match in your 401(k), 403(b) or TSP.
2. Fully fund a Roth IRA.
3. Go back to your workplace retirement plan until you hit 15%.”
Invest for the Long Haul
Like many financial experts, including the legendary Warren Buffett, Ramsey is a huge proponent of being serious with one’s investments, and not bailing on them when the going gets tough.
“Keep a long-term perspective and invest consistently,” a post on Ramsey solutions says. “Historically, the average annual rate of return for the stock market is between 10-12%. Remember that’s an average — some years you’ll see massive returns, in other years you might see negative returns. But over time, you will see your money grow if you keep it invested for the long haul!”
Work With a Financial Advisor
Most Americans don’t take advantage of services offered by financial advisors. This is to their own disadvantage because a financial advisor is key to making a customized plan that works for you and your family. Even Ramsey himself works with one, and he adamantly recommends that you do the same.
“Here’s the gist of it: Financial advisors help you with all types of financial planning,” says a post on Ramsey Solutions. “This means everything from saving for retirement to handling an inheritance. The best advisors break down confusing financial jargon in ways you can understand. And they’ll work with you — as a partner — to make a game plan that puts you on track to achieve your financial goals and retirement dreams.”
When selecting a financial advisor, the Ramsey team recommends asking candidates a slew of questions, including:
- What do you love about your job?
- What services do you provide clients?
- What is your investment philosophy?
- How will we communicate about my investments?
- How do you get paid?
- How will you measure and evaluate my investment performance?
- Can you tell me why the last two clients you lost stopped working with you?
“Any experienced financial advisor will be able to answer all of these questions,” a post on Ramsey Solutions says. “You need to trust the person you’re getting investing and retirement advice from. So if they can’t answer these questions, they’re not the right advisor for you.”
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