Retirement savings programs such as 401(k) plans remain highly valued by American workers, who see them as essential to their financial strategies. Despite market fluctuations, these plans continue to serve as key pillars of long-term financial stability.
Dave Ramsey, the personal finance podcaster and bestselling author, recently spoke exclusively with TheStreet and shared his views on employer-sponsored 401(k) plans.
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He was asked about the biggest mistake Americans make that cost them the most with regard to the money they have available as income in retirement.
Ramsey explained that knee-jerk reactions to stock market volatility are one major factor that have the potential to seriously damage the value of people’s 401(k)s.
“They jump in and out. They freak out when the market goes down, they stop, they start, they try to time the market,” Ramsey said. “And you and I know that there is tons of research on Wall Street about people that try to time the market. They do not keep up with the person who’s steady — the steady investor.”
“The tortoise beats the hare,” Ramsey said. “Every time I read the book, the steady investor always wins.”
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Ramsey explained that he considers himself among those who are patient with investments.
“I’m a steady investor and I teach people to be a steady investor,” he said. “Those are the ones that end up with the most money. Don’t try to time the market. The people that are trained to time the market don’t do it well. And you certainly don’t need to do that.”
“You know, if you’re sitting at home in a standard job and you’re not sitting where you’re sitting every day,” he added, referring to TheStreet’s Rebecca Mezistrano who was on the New York Stock Exchange floor at the time of the remote interview. “If you’re sitting on that floor, maybe you know what you’re doing, maybe you don’t.”
“But the data says that most people can’t do it.”
Image source: TheStreet
Dave Ramsey explains the main way people invest in 401(k) plans
Ramsey has explained the source of the funds most Americans use to invest in their company’s employer-sponsored 401(k) plans.
Ramsey emphasizes that income is the most valuable asset when it comes to building wealth. For the average American, increasing earnings provides the financial flexibility needed to invest in retirement accounts such as a 401(k) or a Roth IRA, allowing funds to grow through strong stock mutual investments.
More on retirement:
- Dave Ramsey sends strong message to Americans on 401(k)s
- Shark Tank’s Kevin O’Leary warns Americans on Social Security
- Scott Galloway sounds the alarm on Social Security, boomers
He also stresses the importance of eliminating debt as a crucial step toward financial success. Clearing financial obligations frees up more cash, making it easier to invest and build long-term security.
According to Ramsey, success — whether in relationships, parenting, career growth, or financial stability — doesn’t happen by chance. Achieving financial goals requires deliberate and strategic action.
Related: Dave Ramsey sends strong message to Americans on 401(k)s
Dave Ramsey recommends adding Roth IRAs to 401(k) savings
Ramsey encourages people to invest in Roth IRAs for their tax advantages. Taxes are paid up front on contributions, so withdrawals in retirement are made tax-free. It’s worth considering other specific details regarding both 401(k)s and Roth IRAs.
Enrolling in a 401(k) plan through an employer is a dependable way to build retirement savings, particularly when companies provide matching contributions.
With automatic deductions taken from each paycheck, this method helps ensure consistent saving without requiring additional effort, making it both practical and efficient.
In 2025, the maximum contribution limit for 401(k) plans has increased to $23,500, up from $23,000 in 2024. Workers between the ages of 60 and 63 can now take advantage of higher catch-up contributions, up to $11,250, while those aged 50 to 59 can contribute an extra $7,500.
For individuals seeking more diverse investment opportunities, a Roth IRA offers additional flexibility that a 401(k) may not provide.
However, Roth IRAs typically require more active management, as account holders must set up the account and arrange automatic contributions themselves. This added responsibility can sometimes make it easy for people to overlook its advantages.
The contribution limit for IRAs remains $7,000 in 2025, with a $1,000 catch-up contribution available for individuals aged 50 and older.
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