The mistake almost half of Social Security beneficiaries make, according to Dave Ramsey: here’s how to fix it

Just about everyone looks forward to retiring, finally having the time to do all the things you’ve planned to do over the years but weren’t able to due to your nine-to-five gig. While only a little over a third of non-retirees think that Social Security will be a major source of income, currently nearly 60% of retirees rely on the program to supplement their income according to a Gallup poll.

However, doubts about the future of the program continually arise and it is predicted that private retirement savings, through 401(k)s and IRAs, will be the No. 1 source of income for future retirees. One catch though, over 40% of Americans are not squirreling away money for their golden years. And even those that are, they aren’t putting aside enough.

Financial expert Dave Ramsey’s advice for saving for retirement

Dave Ramsey has over three decades of experience advising Americans on how to get ready for retirement so that they can have financial freedom. He and his team of analysts have some cautionary words, “Only one-in-10 Americans save 15% or more of their income — the amount industry experts recommend individuals set aside in order to build adequate savings.”

There isn’t a single age group that meets that goal currently according to a March update from Ramsey Solutions. The group that comes the closest with an average savings rate of 9.2% were Americans age 65 and older.

“Instead of packing their bags for their dream vacations in their 60s and 70s, millions of Americans will be packing their lunch for another day at the office,” the study warned.

Are you worried that this may be the case for you? “If you’re feeling behind, remember it’s never too late to get back on track!” states the Ramsey team. “Keep your retirement dreams front and center, then commit to a plan of action that’ll get you there.”

How to fix your retirement savings shortfall

Ideally, to get things rolling, you want to be debt free and have an emergency fund of at least 3-6 months of your expenses. Then set about putting away 15% of your income for retirement placing those savings in growth stock mutual funds. Those getting off to a late start might need to play catch up and put a higher percentage aside.

Ramsey Solutions gives the example of someone earning $50,000 per year. That would mean putting $7,500 into your nest egg each year, or $625 a month.

If you begin when you are 25 and continue to put aside that amount every year, even if you never received a raise over that time period, into a fund with an 11% annual return, after 40 years that egg would be golden. At age 65 you’d be sitting on over $5 million for your retirement.

But know that everybody’s situation is different. So Ramsey Solutions says that it’s advisable to talk to an investment professional to help you figure out just how much you need to save for your own specific situation.

“No one becomes a millionaire overnight,” says Ramsey Solutions. “Keep a long-term mindset and be ready to make some sacrifices along the way.”

“Even if you’ve made some mistakes in the past, remember to focus on what you can control and keep moving forward,” the team added.

This article is for informational purposes only and does not constitute investment advice. All investments carry risk, and past performance is not indicative of future results. If you are unsure about your investment decisions, you should seek advice from a qualified financial professional.

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