Dave Ramsey is known for being outspoken and expressing exactly what he thinks. Over the years, he's been very vocal about Social Security. He's made it clear he's no fan of the program and argues it shouldn't be called a retirement program.
In a YouTube video a few years ago, Ramsey criticized the Social Security system, saying, "The current Social Security system sucks beyond belief. If you were to take 15% of your income and put it in a fruit jar and it earned no interest, you'd have more money per month than these people are going to give you … if they don't go broke first."
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He explained that Social Security has a negative rate of return as a savings program. Essentially, you're contributing money to a retirement program but will receive less than you put in without interest. "This is what's known as a tax. This is not a retirement program," Ramsey emphasized.
In another post a few years later, he referred to Social Security as a "political icon," noting, "Only the government could figure out a way to talk everyone into having something removed from their check that they make a negative 4% on and fight to keep in place."
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Many Americans haven't saved for retirement and think they can rely on Social Security benefits to survive. Ramsey challenges this belief in a blog post, writing, "Relying on the government to take care of you in retirement is dumb with a capital D."
Statistics from the Social Security Administration show that retirees received an average of just $1,657 per month in 2022 from Social Security benefits. Ramsey highlights that this amounts to only $19,900 per year. In 2024, the average Social Security benefit for retirees is $1,907 per month, or $22,884 annually.
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Ramsey doesn't just dislike Social Security because of the "negative return." He doesn't like the uncertainty surrounding its future. Ramsey warns that Social Security benefits could be reduced by over 20% by 2033 unless Congress takes action to fix the shortfall in the Old Age and Survivors Insurance (OASI) Trust Fund.
The federal government might also need to alter Medicare benefits in the coming years. Possible changes include raising the eligibility age, increasing premiums, or cutting coverage to ensure the program remains viable for future retirees.
While Ramsey criticizes the government-backed program, it's important to note these are his opinions, and not everyone agrees.
There are some perks to the program. Social Security benefits are inflation-protected, which experts note is especially beneficial for women who tend to live longer. The guaranteed income it provides is unmatched elsewhere, according to David Blanchett of PGIM DC Solutions. It's also a way for people to invest in their future without having to save any money. Since the deductions are automatically taken out of paychecks, it's something they don't have to even give a second thought.
Social Security benefits are modest by international standards, but they do replace about 39% of past earnings for average earners retiring at 65 in 2024. It may not replace income entirely like other retirement savings investments such as a fully-funded 401(k) or IRA, but it provides a foundation.
As Ramsey emphasizes, "Your retirement is your job – not the government's." He urges you to take retirement into your own hands. Whether you agree or disagree with Ramsey's take, it's always a good idea to have a private retirement account to supplement Social Security, especially since the average retiree spends over $52,000 a year. If you're unsure about your retirement readiness, consulting a financial advisor can help you create a plan to strengthen your savings.
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