Retirement Retirement Planning

Dave Ramsey’s Take on 401(k)s and Roth IRAs (He Doesn’t Hold Back)

Why Dave Ramsey prefers one account over the other.

By Catherine Collins

Updated Nov. 2, 2026

If you're torn between investing in a 401(k) or a Roth IRA, you're not alone. Millions of Americans face this decision every year. One strong voice in the conversation is Dave Ramsey, the well-known financial expert, radio host, and author. He doesn't shy away from making his opinion known, especially when it comes to retirement planning.

Here's what Ramsey thinks about 401(k)s and Roth IRAs, and how you can use his approach to make a more confident decision for your financial future.

Key differences between a 401(k) and a Roth IRA

Both 401(k)s and Roth IRAs offer tax advantages, but they work in opposite ways. With a traditional 401(k), you contribute pre-tax dollars. That means you lower your taxable income now, but you'll pay taxes when you withdraw money later in retirement.

A Roth IRA is the reverse. You contribute after-tax dollars now, so qualified withdrawals in retirement are tax-free.

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Why Dave Ramsey prefers Roth accounts

Ramsey is a strong advocate for Roth accounts. His reasoning is simple: the money in your Roth IRA is all yours when you retire. You've already paid taxes on it, so you won't owe anything when you withdraw it later.

He also likes that Roth IRAs don't come with required minimum distributions (RMDs). If you don't need the money in retirement, you can let it keep growing tax-free.

Ramsey's view on future tax rates

A big reason Ramsey prefers Roth IRAs is his skepticism about future tax rates. He believes it's risky to assume you'll be in a lower tax bracket in retirement, especially with potential changes to tax laws. By paying taxes now, Roth IRA investors could avoid higher tax bills later.

What about the 401(k) employer match?

Even though Ramsey favors Roth IRAs, he still recommends taking full advantage of any employer match on your 401(k). He calls this "free money," and says it should be your first priority if it's available.

His general investing order is:

Invest in your 401(k) up to the employer match.
Max out your Roth IRA.
If you still have room in your budget, go back and contribute more to your 401(k).

If your employer offers a Roth 401(k) with good investment options, Ramsey says you can skip the Roth IRA step and put your entire 15% there.

Contribution limits to consider

One important difference between these accounts is how much you can contribute.

In 2026, the contribution limit for 401(k) plans is $24,500. The Roth IRA limit is much lower, at $7,500. Workers 50 and older can contribute more through catch-up contributions.

Because of these limits, many people may find it useful to contribute to both. The 401(k) allows you to save more, while the Roth IRA gives you tax-free income later.

Ramsey's overall retirement strategy

Ramsey recommends that people invest 15% of their gross income into retirement accounts. He encourages investing in growth stock mutual funds with a long-term strategy and avoiding speculative trends like cryptocurrency or hot stock tips.

He also emphasizes the importance of starting early and staying consistent over time.

Where to find more of his advice

Dave Ramsey shares his personal finance teachings through The Ramsey Show, one of the most listened-to radio shows and podcasts in the country. He's also the author of The Total Money Makeover, which includes his well-known 7 Baby Steps plan. His company, Ramsey Solutions, also features other financial experts who help spread his message.

Bottom line

Dave Ramsey believes the Roth IRA is one of the best tools for retirement because it offers tax-free income later and more flexibility. However, he still supports contributing to a 401(k) if your employer offers a match. Most people could benefit from using both accounts to build a strong foundation for retirement. Following Ramsey's guidance might help you create a strategy that feels both smart and simple for your retirement plan.

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Editor's Note: Portions of this story were drafted with assistance from generative AI tools. All final creative decisions, edits, and fact checking were done by human writers and editors.