One recurring question I’ve frequently encountered during my years of reporting on Americans’ personal finance concerns (including about retirement worries) is this: “How much can I rely on Social Security benefits after my work career?”
The answer, unfortunately, is really not that much. Social Security monthly benefits are an important piece of the retirement income puzzle, but it’s important to keep in mind that they are only a piece.
One way to think of this reality is to understand that the average monthly Social Security check was $2,071 in 2026 (so $24,852 annually), according to the Social Security Administration (SSA).
That’s only $3,702 more than the federal poverty level of $21,150 for a family of two.
“That’s not the best way to spend your golden years,” warned bestselling personal finance author Dave Ramsey.
“That’s why it’s important to build your own retirement savings by investing 15% of your income in growth stock mutual funds through your company’s 401(k) plan or a Roth IRA,” Ramsey added.
Dave Ramsey explains 401(k) contributions
A 401(k) is an employer-sponsored plan designed to help workers build retirement savings. These and other workplace-based retirement programs allow employees to have contributions automatically deducted from their paychecks.
Many workplaces offer an employer match.
“Basically, if you put money in your retirement plan, they’ll pitch in too,” Ramsey wrote. “If your employer offers a company match on your 401(k) contributions, think of it as free money.”
Traditional 401(k) tax implications
- Traditional 401(k) contributions provide tax benefits upfront.
- The money employees put into a traditional 401(k) is not taxed immediately.
- Those contributions are tax-deductible, which reduces their taxable income when they file a return.
- Every dollar contributed lowers taxable income for the year, resulting in a smaller tax bill.
- Taxes are owed later on. Employees will pay taxes on their contributions, employer contributions, and any investment gains when the funds are withdrawn in retirement.
(Source:Ramsey Solutions)
Roth 401(k) tax implications
- A Roth 401(k) option lets employees benefit from tax‑free investment growth and tax‑free withdrawals in retirement.
- Contributions to a Roth 401(k) are made with after‑tax dollars, meaning the money is taxed before it enters the account.
- Employees do not receive an upfront tax reduction the way they would with a traditional 401(k).
- Because the taxes are paid in advance, no additional taxes are owed on those funds when they are withdrawn in retirement.
- This structure trades an immediate tax benefit for a potentially larger long‑term advantage.
- Both approaches offer meaningful tax perks, but when an employer provides a Roth 401(k), many advisors view it as a strong option for workers.
(Source:Ramsey Solutions
401(k) contribution limits for 2026
There are limits to the annual amount one can contribute to a 401(k) plan, and those have changed for 2026, according to the Internal Revenue Service (IRS).
- The annual employee contribution limit for 401(k) plans rises to $24,500 for 2026, up from $23,500 in 2025.
- Workers aged 50 and older can make an additional $8,000 in catch‑up contributions to a 401(k) in 2026, an increase from $7,500.
- This means employees 50+ can contribute up to $32,500 to a 401(k) in 2026.
- A separate, higher catch‑up tier applies to employees aged 60–63, allowing up to $11,250 in catch‑up contributions for 2026.
(Source:IRS)
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Dave Ramsey warns about Social Security’s future
The federal Social Security program faces financial difficulties in the near future.
The combined trust funds that help the pay retired Americans their Social Security benefits are projected to run out of money in 2034, according to the SSA.
“At that time, the projected fund’s reserves would become depleted, and continuing total fund income would be sufficient to pay 81 percent of scheduled benefits,” wrote the SSA in June 2025.
It also explained that the two funds could not actually be combined unless there were a change in the law, but the combined projection of the two funds is frequently used to indicate the overall status of the Social Security program.
More on personal finance:
- Zillow forecasts big mortgage change for U.S. housing market
- AARP sounds alarm on major Social Security problem
- Dave Ramsey bluntly warns Americans on 401(k)s
Legislative action would be needed to avoid benefit reductions in 2034.
“What’s the bottom line?” asked Ramsey. “In its current state, the Social Security system is a mess — and you shouldn’t count on an inept government to fix it.”
“If by some miracle Social Security is around when you retire, you’ll have some extra money to work with,” he added.
“But understand, it’s your job to take care of you and your family, not Uncle Sam’s.”
Related: Fidelity, AARP sound alarm on 401(k) plans, IRAs