Dave Ramsey bluntly speaks on 401(k)s, IRAs

Saving for retirement is one of the most important financial goals people pursue, yet many Americans remain underprepared despite decades of income and opportunity. 

About 70% of workers worry about the necessity of making substantial spending cuts due to inflation, volatility in the stock market and the rising cost of housing, according to a 2025 survey from the Employee Benefit Research Institute. 

The rising cost of living combined with longer life expectancy adds to the pressure many feel to build a secure retirement portfolio.

Bestselling personal finance author Dave Ramsey, acknowledging the reality that Social Security monthly payments are not enough to live on during retirement, encourages American workers to get started as early as possible on saving money in 401(k) plans and Individual Retirement Accounts (IRAs). 

Related: Dave Ramsey has blunt words for Americans on Medicare, Medicaid

Ramsey advises people to begin with a workplace 401(k) plan, which he calls the foundation of a solid retirement.

"Is that the most exciting investing tip out there?" Ramsey asked. "Not really. But do you know what is exciting? Becoming a millionaire." 

Ramsey points to his company's research in The National Study of Millionaires that found 8 out of 10 millionaires said their 401(k) was their main wealth-building tool.

Dave Ramsey explains why 401(k)s are where to start retirement savings

Ramsey writes that contributing to a 401(k) is one of the smartest ways to build long-term financial security.

• Employer matching is essentially free money. Many companies match a portion of your contributions, giving you an immediate 100% return on that matched amount. Ramsey says it’s a no-brainer to take full advantage.
• Tax-deferred growth accelerates your savings. Since you don’t pay taxes on investment gains until retirement, your money compounds more efficiently over time.
• Pretax contributions shrink your taxable income. That means you could owe less in taxes today, freeing up more cash to invest in your future.
• In 2025, people can contribute up to $23,500 to their 401(k), the IRS explains. If one is 50 or older, they can add a $7,500 catch-up contribution, bringing their total to $31,000. And if a spouse has a 401(k), they can contribute the same amount, doubling a household's retirement potential.

Dave Ramsey says IRAs are key retirement savings tools

Ramsey often emphasizes the importance of people taking control of their retirement future — and one of his top recommendations is opening an IRA.

Whether one is rolling over funds from a previous employer or simply looking to boost their retirement savings, an IRA offers flexibility, tax advantages, and long-term growth potential. 

More on personal finance:

• Dave Ramsey sends strong message on housing costs
• Scott Galloway sends strong message on retirement, Social Security
• Tony Robbins makes key statement on IRAs, 401(k)s

Here are a few key reasons why Ramsey encourages individuals to consider opening an IRA:

• More control over your investments. If you’ve left a job and still have money sitting in an old 401(k), rolling it into an IRA gives you broader investment choices and puts you in the driver’s seat.
• Ideal for those without a workplace plan. If your employer doesn’t offer a retirement plan, an IRA is a smart and accessible way to start building your nest egg.
• Tax-free growth with a Roth IRA. Pairing a Roth IRA with your traditional 401(k) gives you both tax-deferred and tax-free growth, helping you diversify your tax strategy for retirement.
• A powerful supplement to your 401(k). Even if you already contribute to a workplace plan, an IRA lets you save even more in a tax-advantaged account, accelerating your retirement goals.

Dave Ramsey encourages American workers to use Roth 401(k)s

The key difference between a Roth IRA and a traditional IRA, Ramsey clarifies, is how the government taxes your money — and that can seriously impact your retirement.

With a Roth IRA, you invest money that’s already been taxed. That means your growth is tax-free, and you won’t owe a dime when you withdraw in retirement. And that's one reason Ramsey calls Roth IRAs the "rock star of retirement accounts."

A traditional IRA lets you deduct contributions now, lowering your taxable income. But Uncle Sam will come knocking later, Ramsey says — you’ll pay taxes on withdrawals, including growth.

Related: Tony Robbins sends warning message to Americans on IRAs, 401(k)s

• 2025 income limits: Anyone with earned income can contribute to a traditional IRA. For Roth IRAs, the amount of income one can make and still contribute is $153,000 for single filers and $243,000 for married couples filing jointly.
• Withdrawals: Traditional IRAs require minimum distributions at age 73. Roth IRAs don’t. Withdraw early from either before 59-and-a-half, and you’ll face taxes plus a 10% penalty. Ramsey says: stay disciplined — your future self will thank you.

Related: Shark Tank’s Kevin O’Leary bluntly speaks on Americans' 401(k)s