Many retirees today rely on Social Security for income. And while those senior benefits
may very well serve as a lifeline for some older Americans, Dave Ramsey warns
that far too many people misjudge the role Social Security should play in their
retirement. Given that the average Social Security retirement benefit today is
only $2,084 per month, it’s easy to see why he feels that way.
Ramsey does acknowledge that without Social Security benefits, almost 40% of
Americans who are 65 and older would live below the poverty line. But that
doesn’t mean retiring on Social Security alone is a smart idea.
Here are Ramsey’s primary concerns about relying too heavily on Social Security,
and what you should do for a financially stable retirement instead.
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Ramsey’s concern with retiring on Social Security
There are a number of key issues with Social Security, Ramsey points out. First,
those benefits were meant to serve as a supplement
for other retirement income. They were not meant to sustain retirees on their
own.
This isn’t just Ramsey’s interpretation. The Social Security Administration
(SSA) itself actually says, “Social Security is not meant to be your only source
of income in retirement. On average, Social Security will replace about 40% of
your annual pre-retirement earnings.”
Plus, as difficult as it may be to absorb a 60% pay cut, things could even get
worse for retirees who depend too much on Social Security if the program ends up
having to cut benefits. And that’s not just a hypothetical.
Ramsey warns that today’s workers should not count on getting all of their
Social Security because the program may, in the coming years, only have enough
money to pay about 83% of scheduled benefits unless lawmakers intervene.
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Social Security’s math doesn’t add up
Citing the SSA, Ramsey also warns that the number of Americans ages 65 and older
will increase from about 61 million in 2023 to roughly 77 million by 2035.
That’s apt to create a strain on the system, as older workers retire en masse
and draw benefit claims at a time when fewer workers will be entering the labor
force to replace them.
Remember, the payroll taxes deducted from your wages to fund Social Security
aren’t saved for you. They go directly to current beneficiaries. If there’s not
enough money left over to pay your benefits in full, that’s a you problem.
Worse yet, Ramsey’s 17% benefit cut estimate is a bit dated. The Social Security Trustees’ 2026 report found that the program’s Old-Age and Survivors Insurance (OASI) Trust Fund, from which retirement benefits are paid, is expected to run dry in the fourth quarter of 2032 — one quarter earlier than the prior year’s projection. At that point, continuing program income would be sufficient to pay 78 percent of scheduled benefits from the OASI Trust Fund.
Combining the OASI and Disability Insurance (DI) Trust Fund could, per the Trustees, push off benefit cuts to 2034 and result in a 17% cut instead of 22%. At that point, continuing income would be sufficient to pay 83 percent of scheduled benefits. Lawmakers would have to vote in that change, though. Social Security can’t combine the two trust funds without approval from Congress.
But the point is the same either way. Social Security could be heading for serious benefit cuts. And relying too heavily on it could mean struggling throughout retirement.
Ramsey’s advice for a comfortable retirement
If you want to enjoy a comfortable retirement without constant financial
struggle, Ramsey has some blunt advice: Save for retirement yourself, and don’t
just rely on your monthly benefits to stay afloat.
Ramsey recommends investing 15% of your income in growth stock mutual funds
through an employer 401(k) or a Roth IRA. You don’t necessarily have to follow
that advice exactly, as you may find that investing in exchange-traded funds
(ETFs) gives you access to the broad stock market at a lower cost.
But no matter what type of portfolio you build to get there, your goal, Ramsey
says, should be to build enough savings through steady retirement plan
contributions and strategic investing to cover your retirement expenses without
Social Security. That way, any money you receive in benefits can be, as he puts
it, “the cherry on top of the sundae you made yourself.”
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Bottom line
Ramsey doesn’t mince words when it comes to Social Security. He calls the
current system “a mess” and warns, “It’s your job to take care of you and your
family, not Uncle Sam’s.”
The reality is that even if lawmakers do manage to fix Social
Security’s pending financial shortfall and prevent benefit cuts, those monthly
checks may still not be enough to pay for the lifestyle you want. And after
decades of hard work, do you really want to have to cut corners?
That’s why it’s a good idea to take Ramsey’s advice to save and start investing consistently for
your senior years. If you end up with more income from Social Security than
expected, that only buys you more options. But if you bank too heavily on Social
Security, you might end up in a nightmare situation.
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