<\/p>\n
One recurring question I’ve frequently encountered during my years of reporting on Americans’ personal finance concerns (including about retirement worries) is this: “How much can I rely on Social Security benefits after my work career?”<\/p>\n
The answer, unfortunately, is really not that much. Social Security monthly benefits are an important piece of the retirement income puzzle, but it’s important to keep in mind that they are only a piece.<\/p>\n
One way to think of this reality is to understand that the average monthly Social Security check was $2,071 in 2026 (so $24,852 annually), according to the Social Security Administration (SSA).<\/p>\n
That’s only $3,702 more than the federal poverty level of $21,150 for a family of two.<\/p>\n
“That\u2019s not the best way to spend your golden years,” warned bestselling personal finance author Dave Ramsey.<\/p>\n
“That\u2019s why it\u2019s important to build your own retirement savings by investing 15% of your income in growth stock mutual funds through your company\u2019s 401(k) plan or a Roth IRA,” Ramsey added.<\/p>\n
Dave Ramsey explains 401(k) contributions<\/p>\n
A 401(k) is an employer-sponsored plan designed to help workers build retirement savings. These and other workplace-based retirement programs allow employees to have contributions automatically deducted from their paychecks. <\/p>\n
Many workplaces offer an employer match.<\/p>\n
“Basically, if you put money in your retirement plan, they\u2019ll pitch in too,” Ramsey wrote. “If your employer offers a company match on your 401(k) contributions, think of it as free money.”<\/p>\n
Traditional 401(k) tax implicationsTraditional 401(k) contributions provide tax benefits upfront.The money employees put into a traditional 401(k) is not taxed immediately.Those contributions are tax-deductible, which reduces their taxable income when they file a return.Every dollar contributed lowers taxable income for the year, resulting in a smaller tax bill.Taxes are owed later on. Employees will pay taxes on their contributions, employer contributions, and any investment gains when the funds are withdrawn in retirement.<\/p>\n
(Source:Ramsey Solutions)<\/p>\n
Roth 401(k) tax implicationsA Roth 401(k) option lets employees benefit from tax\u2011free investment growth and tax\u2011free withdrawals in retirement.Contributions to a Roth 401(k) are made with after\u2011tax dollars, meaning the money is taxed before it enters the account.Employees do not receive an upfront tax reduction the way they would with a traditional 401(k).Because the taxes are paid in advance, no additional taxes are owed on those funds when they are withdrawn in retirement.This structure trades an immediate tax benefit for a potentially larger long\u2011term advantage.Both approaches offer meaningful tax perks, but when an employer provides a Roth 401(k), many advisors view it as a strong option for workers.<\/p>\n
(Source:Ramsey Solutions<\/p>\n
401(k) contribution limits for 2026<\/p>\n
There are limits to the annual amount one can contribute to a 401(k) plan, and those have changed for 2026, according to the Internal Revenue Service (IRS). <\/p>\n
The annual employee contribution limit for 401(k) plans rises to $24,500 for 2026, up from $23,500 in 2025.Workers aged 50 and older can make an additional $8,000 in catch\u2011up contributions to a 401(k) in 2026, an increase from $7,500.This means employees 50+ can contribute up to $32,500 to a 401(k) in 2026.A separate, higher catch\u2011up tier applies to employees aged 60\u201363, allowing up to $11,250 in catch\u2011up contributions for 2026.<\/p>\n
(Source:IRS)<\/p>\n
Dave Ramsey warns Americans against counting too much on Social Security for retirement income and to contribute to a 401(k).<\/p>\n
Shutterstock<\/p>\n
Dave Ramsey warns about Social Security’s future<\/p>\n
The federal Social Security program faces financial difficulties in the near future. <\/p>\n
The combined trust funds that help the pay retired Americans their Social Security benefits are projected to run out of money in 2034, according to the SSA.<\/p>\n
“At that time, the projected fund\u2019s reserves would become depleted, and continuing total fund income would be sufficient to pay 81 percent of scheduled benefits,” wrote the SSA in June 2025. <\/p>\n
It also explained that the two funds could not actually be combined unless there were a change in the law, but the combined projection of the two funds is frequently used to indicate the overall status of the Social Security program.<\/p>\n
More on personal finance:<\/p>\n
Zillow forecasts big mortgage change for U.S. housing marketAARP sounds alarm on major Social Security problemDave Ramsey bluntly warns Americans on 401(k)s<\/p>\n
Legislative action would be needed to avoid benefit reductions in 2034.<\/p>\n
“What\u2019s the bottom line?” asked Ramsey. “In its current state, the Social Security system is a mess \u2014 and you shouldn\u2019t count on an inept government to fix it.”<\/p>\n
“If by some miracle Social Security is around when you retire, you\u2019ll have some extra money to work with,” he added. <\/p>\n
“But understand, it\u2019s your job to take care of you and your family, not Uncle Sam\u2019s.”<\/p>\n
Related: Fidelity, AARP sound alarm on 401(k) plans, IRAs<\/p>\n
#Dave #Ramsey #raises #red #flag #Social #Security #401ks<\/p>\n","protected":false},"excerpt":{"rendered":"
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