10 Retirement Planning Tips That Dave Ramsey Swears By

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Dave Ramsey approaches retirement planning with the same common sense attitude as the rest of this financial advice.

He has personally lived the path to debt freedom and has guided countless others along the journey through his bestselling books and media presence. His key to retirement planning? Disciplined saving, smart investing, avoiding common financial pitfalls and a little soul-searching.

Set Your Retirement Goals

Only around half (48%) of U.S. workers have even tried to calculate what they’ll need for retirement. Having a plan inspires action and reduces fear. Take the time and make your goals concrete by answering Ramsey’s questions:

• What do I want to do in retirement?
• When do I want to retire?
• How much money will I need to save by the time I retire?
• How much will I need to invest every month to hit my retirement goals?
• Which retirement accounts and investments should I choose?

Get Out of Debt

You can’t go full steam ahead on funding your retirement until you’ve dug out of debt — especially high-interest credit cards, car loans or medical payments. Ramsey emphasizes the snowball method: starting with your smallest debts, you pay each off completely before moving on to the next bill.

Then you use the payment amount you were making for the smallest debt and put it toward the next-smallest amount, while you keep up minimum payments on the rest. Note that some experts suggest other approaches, such as targeting the balances with the highest interest rates first, but Ramsey highlights the motivating feeling of crossing debts off your list.

Create a Fully Funded Emergency Fund

No matter where you are today, start with an emergency fund of $1,000. Ramsey suggests that if you have credit card or other consumer debts, you should still put a little bit aside in an emergency fund while you focus on getting rid of that debt.

Then, you can build an emergency fund of three to six months of expenses (with the higher end being for those who have a one-income household or are self-employed or seasonal workers).

How to do this? First, set a savings goal by calculating what you need for three to six months. Then you can start decreasing expenses (have you checked your subscription spending lately?), increasing your income (side hustle, anyone?) and automating your savings (set it and forget it). 

Invest 15% of Your Income

For years, Ramsey has advised getting a chunk of your money into investments. This makes sense since compound interest is the magic potion. Retirement is your longest-term financial goal, and even if you’re starting late, the runway of years between now and the time you stop working is fertile territory for wealth-building.

Put 15% of your household income into Roth IRAs and pre-tax retirement plans, either through your employer or on your own. Take full advantage of employer matches in retirement plans. Plus, did you know that non-working spouses can also put money into a spousal IRA and get the same tax and retirement benefits? 

Strategize for Optimum Investments

Invest in good growth stock mutual funds with a long-term perspective, while being sure to diversify across various asset classes to spread risk. 

Working with a financial professional is probably the best way to do this. This person will also help you review your investments regularly so that you can monitor and adjust your portfolio as needed to stay on track.

That said, you want to steer clear of investments with high fees that eat into your returns, or advisors who prey on your returns with high commissions or transaction fees. 

Bonus Commonsense Tips

Combing through Ramsey’s advice reveals a few more behaviors and mindsets that will boost or protect your retirement savings:

• Be insurance-wise. Double-check that you have adequate insurance coverage, including health, life and disability insurance.
• Save for your children’s college education using tax-advantaged plans like 529s.
• Avoid co-signing loans, as it can jeopardize your financial security.
• Start early. Begin investing for retirement as early as possible to take advantage of compounding interest.
• Finally, Ramsey insists that no one should rely on Social Security to get them through retirement. Rather, think of it as icing on the cake that supplements your other savings. 

You can build the retirement of your dreams by setting your goals with soul, making a plan and keeping tabs on your progress and reaching out to get support from financial professionals.

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