Dave Ramsey's Blunt Advice for Anyone Who's Counting on Social Security

The average Social Security check is only $2,071, according to the Social Security Administration, yet many people retire without additional retirement funds. Dave Ramsey, the founder of Ramsey Solutions and a well-known personal finance expert and radio personality, says that living on just Social Security is a mistake.

Here are a few reasons why he says retirees should save more for retirement and the steps he recommends workers take to have a stress-free retirement in the future.

Social Security income may be unreliable in the future

One of the main reasons Ramsey cautions against putting all your trust in Social Security is that the OASI Trust Fund says by 2033, it will only be able to cover 77% of Social Security benefits. Unless the government passes a new law or makes a policy change, that means many people may be living on less than expected.

For that reason, Ramsey recommends people invest in retirement accounts like 401(k)s and Roth IRAs to ensure they have other sources of income in retirement. He's especially a huge proponent of Roth IRAs because as long as you meet certain qualifications, you can withdraw your money tax-free in retirement. That helps you to avoid surprise tax bills.

If you're still working, there are steps you can take to prepare better for retirement

If you're not retired yet, Ramsey has several recommendations for preparing for your golden years. First, he says to take advantage of your employer's benefits, like 401(k) matching. Additionally, once you turn 50, you can take advantage of catch-up contributions, which allow you to contribute an extra $11,250 to your retirement accounts on top of the 401(k) maximums. However, one piece of advice that sets Ramsey apart is that he recommends people become debt-free before they start investing. This includes not investing in a 401(k) until you've paid off your consumer debt.

Building an emergency fund after eliminating debt is a key part of Ramsey's plan

Ramsey teaches a plan called the 7 Baby Steps. As part of this plan, he encourages his followers to set up a $1,000 emergency fund. Then, he encourages people to pay off all their debt, except for their mortgage. The next step is to build a three- to six-month emergency fund. The goal, essentially, is to free up cash flow that you can then use to invest in your future. Most people who are willing to pay down debt and live on a budget can find ways to allocate extra income to investments. And as mentioned previously, having retirement income in addition to Social Security is a good way to insulate yourself financially.

If you're already retired, there are still steps you can take to improve your finances

If you're already retired, don't give up hope yet. If you haven't taken Social Security yet, you can consider delaying your check. If you delay your check, your monthly benefit increases by 8% each year. If you already receive Social Security checks, there are other steps you can take. For example, speak with an accountant and a financial planner on the best tax strategy for you. Consider taking a part-time job to earn extra income, if you're able. Research assistance programs specifically for seniors that can help you with day-to-day bills.

Ramsey's advice is a warning, but it might not work for everyone

Ultimately, Ramsey's advice is a warning, especially for those who haven't retired yet. Ramsey wants his listeners to be financially independent, and overly relying on Social Security as your retirement income can hinder that. Of course, his advice might not apply to everyone. Some retirees may be comfortable living on just Social Security checks, while others may have a hard time affording their everyday expenses.

Ideas for transitioning better into your golden years

Many retirees find the change from a salaried paycheck to a fixed income to be challenging. However, there are a few steps you can take to prepare for the transition. First, Ramsey recommends working for a few extra years if you truly feel behind on your retirement savings and you're healthy enough to do so. Next, practice living on less. Without a commute into the office or having to buy work clothes, there is room to save. Finding free activities, like taking walks in nature, instead of more expensive ones can help improve your cash flow. Paying down bills, especially high-interest debt, can reduce stress and allow your money to stretch further.

Why Ramsey has millions of fans

Ramsey may have a bit of a tough-love approach to the people who call in to his show, but he has millions of fans because he speaks to people directly. He regularly mentions that he, too, was once broke and declared bankruptcy. He understands and empathizes with his callers while also giving them concrete steps to improve their finances.

Bottom line

If Social Security is your only retirement plan, Ramsey encourages you to increase your retirement income streams. Whether that's through other retirement plans or working extra, Ramsey explains relying on Social Security alone may not be enough to create a stable, happy retirement.

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