Retirement Retirement Planning

Dave Ramsey Weighs In on 401(k)s and Roth IRAs - and He Doesn’t Sugarcoat It

Why Dave Ramsey prefers one account over the other.

By Catherine Collins

Edited by Amanda Machado

Updated Jan. 7, 2026

If you're having trouble deciding between investing in a 401(k) retirement plan or a Roth IRA, you're not alone. Millions of Americans face this choice every year, and it can be hard to know which option is best for your personal situation. One unapologetic voice on this issue is Dave Ramsey. Dave Ramsey is a long-time personal finance expert, radio host, entrepreneur, and best-selling author who has strong opinions on several personal finance topics, including retirement.

Millions of people follow his advice every year, so let's break down what he thinks about the 401(k) versus Roth IRA debate. That way, you can use his advice to make an informed decision.

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The differences between 401(k)s and Roth IRAs

401(k)s and Roth IRAs are both retirement savings vehicles. Both have tax advantages, but they differ in when you actually pay the taxes. With a traditional 401(k), you contribute pre-tax dollars to the account. This can lower your taxable income and provide present-day savings when filing your taxes.

On the other hand, you fund a Roth IRA with after-tax dollars. The benefit of this is that when you retire, you can withdraw your earnings tax-free as long as you meet specific qualifications.

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Why Ramsey favors Roth accounts

Dave Ramsey says Roth accounts are more advantageous than 401(k) accounts. The primary reason is that the money in your Roth account is essentially worth more. You can withdraw the full amount, whereas the funds in your 401(k) aren't entirely yours because you will still have to pay taxes on them.

Additionally, there are no required minimum distributions with a Roth IRA account. If you don't want to take money out of your Roth IRA because you have other ways to fund your retirement, you don't have to.

Ramsey's thoughts on future tax rates

One reason Dave Ramsey prefers Roth IRAs over 401(k)s is that he does not have confidence that future taxes will be lower than today's taxes. He explains that when you use a tax-deferred account like a 401(k), it's based on the assumption that your tax rate will be lower in retirement.

However, the future of tax legislation is uncertain. That's why Ramsay prefers a Roth account since withdrawals are tax-free.

Ramsey still supports getting 401(k) employer matches

Even though Ramsey says Roth IRAs are the better retirement option than 401(k)s, he still encourages people to contribute enough to their 401(k)s to get the full employer match.

In fact, he teaches his followers a specific investing order that involves getting your employer's 401(k) match first, since it's essentially free money, and then moving on to investing in a Roth IRA.

401(k) vs. Roth IRA contribution limits

Another important factor when deciding between a 401(k) and a Roth IRA is the contribution limits. 401(k) plans allow employees to contribute much more to retirement. For example, in 2026, the IRS updated the contribution rate to $24,500. Roth IRA contribution limits, on the other hand, are $7,500.

Because of these contribution limits, it makes sense for most employees to invest in both accounts to ensure that they have enough money to retire on in the future.

The best account to save for retirement

Ultimately, Ramsey says the best way to save for retirement is first to get your 401(k) employer match if you have one, and then open a Roth IRA and invest in that.

He also suggests investing in growth stock mutual funds and avoiding trendy investments like cryptocurrency or the latest hot stock pick. Ultimately, Ramsey encourages his followers to invest early, stay consistent, and make sure they invest 15% of their gross income to achieve financial freedom in retirement.

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Where to find Ramsey's advice

Dave Ramsey shares his personal finance philosophy on numerous platforms. His nationally syndicated radio show and podcast is called the Dave Ramsey Show. This is one of the most popular financial shows on the radio and podcasting platforms today. He also has several best-selling books. The Total Money Makeover is his best-known book, which shares his overall personal finance philosophy and outlines The 7 Baby Steps, his financial plan, which he is widely known for today.

Ramsey Solutions also has several Ramsey personalities, who are other personal finance experts who co-host the Ramsey Show and have their own books and podcasts.

Bottom line

Dave Ramsey is a huge proponent of using retirement accounts to build tax-advantaged investments that you can live off of once you stop working. However, he prefers some retirement accounts over others and believes that to retire comfortably, Roth IRAs are the best option because you can withdraw your retirement funds tax-free. That said, due to contribution limits, Ramsey acknowledges that most people will need to have several retirement accounts and income streams to reach their financial goals later in life.

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