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The Truth About Retirement

Myth: When saving for retirement, the more complex strategies earn you more money.

Truth: Saving for retirement must be consistent—not complicated. Invest only when you’re ready financially, and never invest in something you don’t understand.

We’ve been led to believe that the more complex an investment is, the more likely it is to make money. Nothing could be further from the truth. You can retire with dignity using just a few tools.

Begin With a Firm Foundation

Dave Ramsey has taught more than five million people how to get out of debt and build wealth. He recommends you begin investing for retirement after you’ve done two things: you’re debt-free, and you have saved an emergency fund of three to six months of expenses. Three-fourths of the people on Forbes list of the 400 wealthiest people in America say getting and staying debt-free is the most important thing you can do when it comes to handling your money. The full emergency fund ensures you have a cushion in case of an illness or job loss and that your retirement funds stay where they are and keep growing.

A Simple Plan That Works

Your income is your most powerful wealth-building tool, so once you’re debt-free, invest 15% of your income in Roth IRAs and pre-tax retirement accounts. If you receive a 401(k), 403(b) or TSP match from your employer, invest up to the match. Then, fully fund a Roth IRA for you (and your spouse, if married). If that doesn’t add up to 15% of your household income, invest more with your employer plan until you reach 15%.

Here’s an example:

Gross household income: $70,000
Husband: $38,000
Wife: $32,000
15% of $70,000 $10,500
Husband’s 401(k) matches 3%* -$1,140
Wife’s 401(k) matches 4%* -$1,280
Remainder into Roth IRA $8,080


(Couples under age 50 can contribute up to $11,000 per year to a Roth IRA. There are income restrictions on Roths. Talk with an investing professional to be sure you qualify.)

*The employer match does not count toward your 15%. However, it automatically doubles your investment in your 401(k)!

Put your retirement money in growth stock mutual funds with a track record of at least five years of consistent returns. Divide your portfolio equally among growth, growth and income, international and aggressive growth funds.

This Is Long-Term Investing

The money you invest for retirement is not to be used for anything other than retirement income, for two really good reasons:

  • The longer your money stays invested, the more it can grow. Over the last 30 years, the S&P 500, a standard measurement of stock market performance, has averaged a 12% growth rate.(1)

  • You’ll be hit with high penalties and taxes if you take money out of these investments before age 59 1/2. Never borrow from your 401(k), and always roll your 401(k) balance into a rollover IRA if you change jobs.

After investing for 25 years averaging 12% per year, the couple in our example above will have nearly $1.6 million saved for retirement! Don’t believe us? Check out our Investment Calculator!

Talk With An Investing Pro

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Find Your Pros

This article provides general guidelines about investing topics. Your situation may be unique. To discuss a plan for your situation, connect with a SmartVestor Pro. Ramsey Solutions is a paid, non-client promoter of participating Pros. 

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Ramsey Solutions

About the author


Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners. Learn More.

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