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Miami Herald
2 days ago
- Business
- Miami Herald
Dave Ramsey sounds alarm on Social Security for all Americans
As retirement approaches, American workers grapple with concerns about financial stability, health care costs, and lifestyle changes, carefully assessing savings, investments, and anticipated Social Security benefits to ensure a comfortable and secure future without unexpected financial strain. Understanding Social Security's role in retirement planning is crucial, as people evaluate their expected benefits and strategize around timing to maximize payouts, balancing personal savings with projected government support. They also consider rising health care expenses, inflation, and longevity risks, making informed financial decisions to sustain their desired quality of life. Dave Ramsey, the popular personal finance author and radio host, sounds an alarm about the urgency of understanding Social Security benefits and ways to smartly handle the financial transition into one's retirement years. Don't miss the move: Subscribe to TheStreet's free daily newsletter Ramsey emphasizes the importance of careful planning for Social Security in retirement, warning that relying solely on these benefits may not be enough to maintain financial stability. He highlights the fact that Social Security often falls short of covering living expenses comfortably, making it essential for retirees to supplement their income with savings and investments such as 401(k)s and IRAs (Individual Retirement Accounts). Ramsey also cautions against claiming Social Security benefits too early while still working, as doing so can lead to temporary reductions in payments. For instance, in 2024, benefits were reduced by one dollar for every two dollars earned beyond an annual income threshold of $22,320. Related: Shark Tank's Kevin O'Leary sends strong message on Social Security However, these deductions are not permanently lost - they are withheld until a person reaches full retirement age, typically 67. Ramsey urges people to pay attention to the importance of considering health care costs, as Medicare does not cover all medical expenses, leaving retirees responsible for additional costs such as long-term care. Ramsey's advice encourages Americans to take a proactive approach to retirement planning, ensuring they have a well-rounded financial strategy that accounts for potential gaps in Social Security coverage and rising health care expenses. Ramsey bluntly explains that Social Security's trust funds are projected to run out by 2034, which could lead to a reduction in monthly benefits to about 80% of what retirees currently expect if lawmakers fail to intervene. He stresses that Social Security was never intended to be the primary source of retirement income but rather a supplement to personal savings. Ramsey advises people to take control of their financial future by consistently contributing to employer-sponsored 401(k) plans and tax-advantaged IRAs throughout their careers. He urges people to start saving early and offers a few brief words on monthly Social Security paychecks that pack a punch. "Don't count on it," he wrote. "Or don't count on all of it." His message reinforces the importance of proactive retirement planning to ensure financial stability beyond Social Security's uncertain future. More on retirement: Dave Ramsey sounds alarm for Americans on Social SecurityScott Galloway warns Americans on 401(k), US economy threatShark Tank's Kevin O'Leary has message on Social Security, 401(k)s The number of workers supporting each Social Security recipient was 2.7 in 2023, according to a fact sheet from the Social Security Administration. However, by 2035, that ratio is expected to drop to 2.4 as millions of baby boomers enter retirement. This shift will put increased pressure on the system and could impact future benefits. Related: Dave Ramsey sends strong message to Americans on 401(k)s Ramsey advises Americans to carefully consider whether to claim Social Security benefits early at a reduced amount or wait until full retirement age (or later) for larger monthly payments. Importantly, because this decision is permanent, Ramsey stresses the importance of weighing financial needs and longevity when planning for retirement income. Ramsey suggests that claiming benefits sooner is often the better strategy, as Social Security payments stop upon death (except in cases involving surviving family members), meaning retirees should take advantage of them while they can. He encourages those who do not rely on Social Security for basic expenses to invest their payments to grow their wealth. Additionally, taking benefits early extends the total payment period, potentially increasing lifetime earnings, Ramsey explains. For example, a retiree eligible for $1,500 per month at age 67 would receive $1,050 monthly at 62 or $1,860 at 70, making timing a key factor in financial planning. Related: Jean Chatzky warns Americans on Social Security, 401(k)s The Arena Media Brands, LLC THESTREET is a registered trademark of TheStreet, Inc.
Miami Herald
29-05-2025
- Business
- Miami Herald
Jean Chatzky sends sharp message on 401(k)s, Roth IRAs
With growing concerns about market fluctuations and the potential for an economic downturn, many American workers are focused on managing the financial pressures of everyday life - covering housing costs, keeping up with rising grocery prices, fuel expenses, and other necessities. Even as they navigate these immediate financial demands, they continue planning for the future, actively contributing to 401(k) plans and Individual Retirement Accounts (IRAs) to build a secure retirement and maintain financial resilience in an unpredictable economy. Jean Chatzky, a well-known author and former financial editor for NBC's Today Show, offers insightful perspectives on 401(k) plans and IRAs - including one tactic regarding an intriguing strategy for handling IRAs that many will have an interest in exploring. Don't miss the move: Subscribe to TheStreet's free daily newsletter Overall, U.S. employees acknowledge the value of retirement savings tools such as 401(k) plans and IRAs, even during periods of market uncertainty. Enrolling in an employer-sponsored 401(k) plan remains one of the most effective ways to save for retirement, particularly when employers provide matching contributions. With automatic deductions taken directly from paychecks, this system ensures consistent savings without requiring extra effort, making it both practical and seamless. The contribution limit for 401(k) plans has increased to $23,500 in 2025, compared to $23,000 in 2024. Employees aged 60 to 63 can now make larger catch-up contributions of up to $11,250, while those aged 50 to 59 can contribute up to $7,500 in catch-up funds. Related: Jean Chatzky warns Americans on Social Security, 401(k)s IRAs offer additional investment options that may not be accessible through a 401(k), making them an appealing choice for certain savers. However, IRAs require a more proactive approach, as individuals must set up the account and arrange automatic contributions independently. This added level of responsibility can lead some to overlook their advantages. The contribution cap for IRAs remains at $7,000 in 2025, with an additional $1,000 available for those aged 50 and above. Chatzky advises beginning 401(k) contributors to start small but consistently increase contributions. She suggests beginning with 3% of one's pay, then raising it by 2% annually. For most people, an eventual goal of contributing 10% of one's income to a 401(k) is sufficient, Chatzky recommends. For those beginning to establish 401(k) contributions later in their careers, 15% is an appropriate figure. The automatic deduction featured by 401(k) plans and the opportunity to take advantage of employer matching are strategies Chatzky endorses. In fact, Chatzky suggests the automatic deduction concept as an ideal for which to strive in other areas of one's financial savings approach. More on retirement: Dave Ramsey sounds alarm for Americans on Social SecurityScott Galloway warns Americans on 401(k), US economy threatShark Tank's Kevin O'Leary has message on Social Security, 401(k)s "The reason 401(k) plans work is because you set them up and then the money gets zapped from your paycheck before you can see it or touch it or spend it," Chatzky wrote. "It disrupts human impulsivity." Chatzky emphasizes the importance of extending automation beyond retirement savings. If one's workplace offers a health savings account, one can arrange payroll deductions to streamline contributions. A person can ensure consistent funding for 529 plans and other investments by scheduling automatic transfers directly from their checking account. "If you're not someone who will regularly rebalance your investments, put your money in a target date or balanced fund that will do the work for you," Chatzky wrote. "Auto-paying select bills is a big help, too." Related: Shark Tank's Kevin O'Leary sends big Social Security message to all Americans A traditional IRA allows tax-deductible contributions, but withdrawals in retirement are taxed. A Roth IRA has after-tax contributions, but withdrawals are tax-free. Many high earners aim to minimize taxes in retirement, often considering converting a traditional IRA to a Roth IRA if they expect lower tax rates later. Chatzky addresses this strategy, known as a backdoor Roth IRA. She cautions that converting assets requires paying taxes upfront, which can be costly. Using IRA funds to cover taxes is discouraged, as it could significantly reduce savings. This approach is only advisable for those with sufficient funds outside their IRA to handle the tax burden, Chatzky stresses. Related: Veteran fund manager unveils eye-popping S&P 500 forecast The Arena Media Brands, LLC THESTREET is a registered trademark of TheStreet, Inc.
Miami Herald
24-05-2025
- Business
- Miami Herald
Shark Tank's Kevin O'Leary sends big Social Security message now
As Americans approach retirement, many become increasingly concerned about Social Security and its impact on their financial stability in later years. Entrepreneur Kevin O'Leary, widely recognized as a key investor on ABC's "Shark Tank," shares an important perspective on Social Security, offering a critical warning about retirement that extends beyond the government's monthly payments. Don't miss the move: Subscribe to TheStreet's free daily newsletter Recent staffing reductions have reportedly led to inefficiencies in Social Security's operations, with longer wait times on phone calls, for example, raising concerns among both current and future beneficiaries. An even greater issue is the long-term financial sustainability of the program. Without legislative intervention, Social Security's trust funds are projected to be depleted by 2034. Should this occur, recipients may see their monthly benefits shrink to approximately 80% of what they had originally expected. Related: Dave Ramsey sounds alarm for Americans on Social Security Additionally, cost-of-living adjustments (COLA), which are designed to increase Social Security payments, have not always aligned with inflation rates, leaving many struggling to maintain their standard of living. Economic uncertainty, particularly during downturns or recessions, only heightens worries that retirees may need to rely more heavily on Social Security than they had initially planned. O'Leary addresses these growing financial anxieties, offering a cautionary message that Americans would do well to consider. First, O'Leary emphasizes the important reality that Social Security was not designed to be the only source of financial support for retirees. According to the Social Security Administration, the average monthly paycheck was $1,976 - which amounts to $23,712 annually. It does not offer the level of financial stability that most retirees aspire to achieve. This fact requires Americans, during their working years, to save as much as they can in employer-sponsored 401(k) accounts and tax-advantaged IRAs (Individual Retirement Accounts). More on retirement: Dave Ramsey sounds alarm for Americans on Social SecurityScott Galloway warns Americans on 401(k), US economy threatShark Tank's Kevin O'Leary has message on Social Security, 401(k)s In his book Cold Hard Truth for Men, Women, and Money, O'Leary highlights a troubling financial trend: Nearly two-thirds of families led by individuals aged 65 to 74 carry some form of debt. Among them, more than half have debt exceeding $40,000. Attempting to pay this off while collecting relatively small income from Social Security benefits is a difficult task. Older Americans are believed to be the fastest-growing demographic facing the risk of bankruptcy. "It's a generational time bomb," O'Leary wrote. "Debt in your later years exacerbates existing health challenges and creates new ones, when you're at your most vulnerable." "There's no use berating yourself, or obsessing over how you came to be broke or in debt well past middle age," he continued. "Put it behind you and make a new plan. First item on your list: Get rid of any and all remaining debt." "That is your first and only priority." Related: Scott Galloway warns Americans on 401(k), US economy threat O'Leary highlights insights from financial experts, who suggest that Social Security recipients should aim to replace roughly 65% of their pre-retirement gross income to maintain their standard of living. For instance, an American earning $100,000 annually would need around $65,000 in their first year of retirement to cover expenses. This estimate factors in Social Security benefits which, as mentioned above, typically amount to about $24,000 per year. To bridge the gap, retirees must find ways to generate an additional $41,000 annually from other sources of income - often from those 401(k)s and IRAs that will have grown in value during one's career. This projection assumes retirees wish to preserve a lifestyle similar to their working years. However, certain expenses - such as frequent dining out and entertainment costs - may become less relevant. Without the costs of commuting, restaurant meals, and other expenses associated with a work lifestyle, retirees often experience reduced financial burdens, allowing them to adjust their spending habits accordingly. By planning ahead, individuals can ensure their retirement years remain comfortable while navigating shifts in their day-to-day financial habits. Related: Veteran fund manager unveils eye-popping S&P 500 forecast The Arena Media Brands, LLC THESTREET is a registered trademark of TheStreet, Inc.
Miami Herald
21-05-2025
- Business
- Miami Herald
Dave Ramsey sends strong statement on Costco
Smart financial decisions made during one's working years can have a profound impact on retirement savings. Dave Ramsey, a well-known advocate for financial discipline, emphasizes the importance of living within one's means and making strategic purchasing choices - including shopping at stores such as Costco. By adhering to Ramsey's principles of budgeting and avoiding unnecessary spending, Americans can maximize their savings potential and strive toward building a secure retirement future. Don't miss the move: Subscribe to TheStreet's free daily newsletter Every dollar saved can be invested in 401(k) plans and IRAs (Individual Retirement Accounts) - so it all counts and is very important. One of Ramsey's core beliefs is that small, consistent savings over time can compound into substantial wealth. He warns against impulse purchases and encourages consumers to be intentional with every dollar spent. While Costco offers bulk discounts and high-quality products, shopping there requires discipline to avoid stocking up on unnecessary items. Ramsey advises against purchasing perishable goods in bulk unless they can be used efficiently, cautioning against wasting money on items that may expire before they're fully utilized. Instead, he recommends focusing on staple items such as toiletries, batteries, and canned goods, which can provide genuine long-term savings. By adopting a mindset of frugality and making thoughtful spending decisions, workers can allocate more funds toward retirement investments rather than unnecessary purchases. Eliminating debt, maintaining a realistic budget, and prioritizing savings can transform a modest income into a comfortable retirement. Related: Shark Tank's Kevin O'Leary sends strong message on Social Security To save money when shopping at Costco and other stores in the interest of contributing more to 401(k) plans and IRAs, Ramsey has some specific and carefully worded advice. "There are two heavy hitters in the wholesale world," Ramsey wrote. "Costco and Sam's Club. Both stores are pretty similar when it comes down to what they sell. If you want to buy a 10-pound bag of cubed cheese, this is where you'll find it!" Ramsey continues. "While it might be tempting to grab that 80-ounce jar of mustard, ask yourself, Am I really going to eat that?" he asks. "You don't want to buy in bulk just to end up with the 'bulk' of it in the trash. Stick to buying things you know you or your family will eat or use." "And when you're comparing prices, you'll need to pay attention to the overall cost (to make sure you don't go over budget) and figure out your cost per unit," Ramsey added. More on retirement: Dave Ramsey sends strong message to Americans on 401(k)sShark Tank's Kevin O'Leary warns Americans on Social SecurityScott Galloway sounds the alarm on Social Security, boomers When a person saves that money, they have more to contribute to their retirement savings. Related: Dave Ramsey sends strong message to Americans on 401(k)s In general, workers in the U.S. understand the significance of retirement savings options such as 401(k) plans and IRAs, even during times of economic uncertainty. "If your company offers a match on your contributions, take advantage of it," Ramsey wrote. "Invest enough to get the full amount - it's free money! Don't leave it on the table." Enrolling in a 401(k) plan offered by an employer is a dependable way to grow retirement funds, particularly when companies provide matching contributions. Because contributions are automatically deducted from each paycheck, this strategy ensures steady savings without requiring ongoing effort, making it both practical and effective. For 2025, the maximum contribution limit for 401(k) plans has increased to $23,500, up from $23,000 the previous year. Additionally, workers aged 60 to 63 can now take advantage of higher catch-up contributions, with a new limit of $11,250 - an increase from $7,500 for individuals aged 50 to 59. An IRA provides access to investment opportunities that may not be available through a 401(k), making it an appealing choice for some. However, IRAs often demand more active participation, as individuals must set up the account and arrange automatic contributions themselves. This extra level of responsibility could lead some to overlook its potential benefits. For 2025, IRA contribution limits remain at $7,000, with an additional $1,000 in catch-up contributions available to those aged 50 and above. Related: Veteran fund manager unveils eye-popping S&P 500 forecast The Arena Media Brands, LLC THESTREET is a registered trademark of TheStreet, Inc.
Miami Herald
21-05-2025
- Business
- Miami Herald
Dave Ramsey sounds alarm on Social Security
Navigating the transition from a steady paycheck to retirement can be daunting for American workers. Financial concerns weigh heavily during this period, as Social Security benefits alone often fall short of covering living expenses comfortably. Many retirees rely on their savings and investments - such as 401(k)s and IRAs (Individual Retirement Accounts) - to bridge the gap and ensure financial stability. Dave Ramsey, the personal finance author and radio host, offers one strategy that helps ease the transition for some. His idea allows retirees to maintain a sense of purpose, supplement their income, and adjust to their new lifestyle more gradually. Don't miss the move: Subscribe to TheStreet's free daily newsletter One major concern for retirees, Ramsey explains, is the cost of health care. Medicare becomes available at age 65, but it doesn't cover all medical expenses, leaving retirees to handle additional costs on their own. Long-term care, which includes assistance with daily activities such as dressing and eating, is one area where individuals must seek independent insurance coverage. However, Medicare does provide coverage for short-term hospital stays and hospice care. Beyond financial worries, retirees frequently grapple with the lifestyle shift that comes with leaving the workforce. The change in daily routine can feel abrupt, and many seek ways to stay active, socially engaged, and connected to their communities. Related: Shark Tank's Kevin O'Leary sends strong message on Social Security At the heart of retirement planning is the need to secure financial stability. Workers continue to place high value on retirement accounts, with 401(k)s - especially those offering employer-matching contributions - remaining a popular option for consistent savings. IRAs, while requiring more hands-on management, offer greater investment flexibility. Taking all of this into account, Ramsey sounds one alarm. Ramsey points out that some individuals choose to claim Social Security benefits while remaining employed. This option is available starting at age 62, though it comes with a tradeoff-benefits are temporarily reduced by one dollar for every two dollars earned beyond a predetermined annual household income threshold. In 2024, that limit was set at $22,320. However, these Social Security deductions aren't permanently lost. Rather, they are withheld until the person reaches full retirement age, which for most is 67. At that point, the government adjusts payments, resulting in a higher monthly benefit to compensate for the earlier reductions. This is where Ramsey underscores the significance of the decision, delivering a strong statement that is worth attention. More on retirement: Dave Ramsey sends strong message to Americans on 401(k)sShark Tank's Kevin O'Leary warns Americans on Social SecurityScott Galloway sounds the alarm on Social Security, boomers "Keep in mind that not all income counts toward your limit, only earnings from work," Ramsey wrote. "Income from other government or military retirement benefits, investment earnings, interest, pensions, annuities and capital gains, for example, aren't counted against your limit." This is an important point. Once they reach full retirement age, Americans have the option to remain in the workforce while collecting their full Social Security benefits. But it is vital to learn the specific implications. Related: Dave Ramsey sends strong message to Americans on 401(k)s A fact sheet from the Social Security Administration states that in 2023, there were 2.7 workers contributing to Social Security for each beneficiary. By 2035, that ratio is projected to decline to 2.4, largely due to the retirement of millions of baby boomers over the next decade. Ramsey offers caution on Social Security solvency. Its trust funds are only expected to sustain full benefit payments until 2034. Without legislative intervention, recipients would see their monthly payments reduced to just 80% of what they currently anticipate. He emphasizes that Social Security was never designed to serve as a retiree's sole source of income. Instead, it should be viewed as a supplemental resource to bolster retirement savings, which individuals can strengthen by contributing to employer-sponsored 401(k) plans and tax-advantaged IRAs throughout their careers. Ramsey also stresses the urgency of beginning retirement savings early to ensure financial security later in life. Related: Veteran fund manager unveils eye-popping S&P 500 forecast The Arena Media Brands, LLC THESTREET is a registered trademark of TheStreet, Inc.
