Dave Ramsey sounds alarm on Social Security | Official Website of Louis Velazquez, entrepreneur, finance guy and tech innovator

Navigating the transition from a steady paycheck to retirement can be daunting for American workers.

Financial concerns weigh heavily during this period, as Social Security benefits alone often fall short of covering living expenses comfortably. Many retirees rely on their savings and investments — such as 401(k)s and IRAs (Individual Retirement Accounts) — to bridge the gap and ensure financial stability.

Dave Ramsey, the personal finance author and radio host, offers one strategy that helps ease the transition for some. His idea allows retirees to maintain a sense of purpose, supplement their income, and adjust to their new lifestyle more gradually.

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One major concern for retirees, Ramsey explains, is the cost of health care. Medicare becomes available at age 65, but it doesn’t cover all medical expenses, leaving retirees to handle additional costs on their own.

Long-term care, which includes assistance with daily activities such as dressing and eating, is one area where individuals must seek independent insurance coverage. However, Medicare does provide coverage for short-term hospital stays and hospice care.

Beyond financial worries, retirees frequently grapple with the lifestyle shift that comes with leaving the workforce. The change in daily routine can feel abrupt, and many seek ways to stay active, socially engaged, and connected to their communities.

At the heart of retirement planning is the need to secure financial stability. Workers continue to place high value on retirement accounts, with 401(k)s — especially those offering employer-matching contributions — remaining a popular option for consistent savings. IRAs, while requiring more hands-on management, offer greater investment flexibility.

Taking all of this into account, Ramsey sounds one alarm.

A retired couple is seen holding hands and walking on a beach. Personal finance radio host Dave Ramsey explains a key retirement fact to help with a comfortable life after working years.

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Dave Ramsey warns Americans about one Social Security mistake not to make

Ramsey points out that some individuals choose to claim Social Security benefits while remaining employed.

This option is available starting at age 62, though it comes with a tradeoff—benefits are temporarily reduced by one dollar for every two dollars earned beyond a predetermined annual household income threshold. In 2024, that limit was set at $22,320.

However, these Social Security deductions aren’t permanently lost. Rather, they are withheld until the person reaches full retirement age, which for most is 67. At that point, the government adjusts payments, resulting in a higher monthly benefit to compensate for the earlier reductions.

This is where Ramsey underscores the significance of the decision, delivering a strong statement that is worth attention.

More on retirement:

“Keep in mind that not all income counts toward your limit, only earnings from work,” Ramsey wrote. “Income from other government or military retirement benefits, investment earnings, interest, pensions, annuities and capital gains, for example, aren’t counted against your limit.”

This is an important point. Once they reach full retirement age, Americans have the option to remain in the workforce while collecting their full Social Security benefits. But it is vital to learn the specific implications.

Dave Ramsey warns Americans on Social Security solvency

A fact sheet from the Social Security Administration states that in 2023, there were 2.7 workers contributing to Social Security for each beneficiary. By 2035, that ratio is projected to decline to 2.4, largely due to the retirement of millions of baby boomers over the next decade.

Ramsey offers caution on Social Security solvency. Its trust funds are only expected to sustain full benefit payments until 2034. Without legislative intervention, recipients would see their monthly payments reduced to just 80% of what they currently anticipate.

He emphasizes that Social Security was never designed to serve as a retiree’s sole source of income. Instead, it should be viewed as a supplemental resource to bolster retirement savings, which individuals can strengthen by contributing to employer-sponsored 401(k) plans and tax-advantaged IRAs throughout their careers.

Ramsey also stresses the urgency of beginning retirement savings early to ensure financial security later in life.