Dave Ramsey has the inside scoop on Social Security, retirement, 401(k)

Many people worry about the unpredictable future of Social Security and how much they can rely on the federal program for funds in their retirement years.

Personal finance author and radio host Dave Ramsey explains what’s next for Social Security over the next decade and offers his thoughts on how much current workers should rely on it when they retire.

Related: Dave Ramsey Has a Major Warning About Retirement, 401(k), Social Security

First, it’s important to understand that Social Security’s combined trust fund reserves will be depleted in 2035. Until then, reserves will make up the difference between revenues and costs.

After the reserves are exhausted, program revenues will still be able to pay about 80 percent of the promised benefits. And that will only happen if Congress fails to make adjustments.

Ramsey believes that given the uncertainty of Social Security’s future, workers should understand that it is their own individual financial responsibility to plan for retirement using other means.

And the radio host explains some investment tools that people can use to take care of themselves and their families without depending on the government.

Dave Ramsey clears the mind on 401(k)s and Roth IRAs for retirement

Ramsey emphasizes his view on the importance of investing 15% of your income in growth stock mutual funds through an employee-sponsored 401(k) and a Roth IRA.

The Personal Finance Coach clarifies his views on the guidelines to follow when using this investment strategy for retirement savings.

When it comes to employee-sponsored 401(k)s, Ramsey explains that it’s not enough to simply invest up to the employer’s matching percentage.

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One strategy designed for success is to have money beyond your company’s 401(k) match invested in a Roth IRA.

That’s because Roth IRA contributions are made with after-tax money, so as those investments grow in value, they grow tax-free. This approach is important because it can increase your savings, particularly if you retire in a higher tax bracket than you were when you originally invested the money.

If a person is able to execute these plans effectively, Ramsey says, there’s another strategy to consider when it comes to Social Security payments that might surprise people.

A retired couple is seen holding hands and walking on a beach. Personal finance personality Dave Ramsey says it’s not enough to rely solely on Social Security checks during retirement.

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Ramsey discusses claiming Social Security benefits early

One decision people need to consider about Social Security payments involves the question of when is the best time to start receiving them.

In general, the longer they wait to claim benefits, the higher the wages will be. But Ramsey suggests an approach that can lead to both retiring earlier and earning more money from your Social Security benefits in the long run.

Related: Dave Ramsey has powerful new words about buying a home and real estate

If the wealth built up in your 401(k) and Roth IRA by retirement is enough so you don’t need to use all the money in your Social Security checks, you can invest that money and watch it grow during retirement. as well as your other investments.

For example, Ramsey explains that if you were to invest $700 a month from age 62 to age 77, that would be 15 years of investing that could add up to another $318,000 or so.

According to the Centers for Disease Control and Prevention, the average American life expectancy is 77 years.

If you live to this age, you may end up getting more money from Social Security by claiming benefits at age 62 and investing the money.

It’s a safe assumption that most people would consider that a desirable outcome compared to spending more time working after age 62 while waiting for the larger monthly benefit.

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