Dave Ramsey, a personal finance expert, recently shared his insights on 401(k)s and Roth IRAs. He believes these are powerful tools for Americans to save and invest for retirement. A 401(k) is an employer-sponsored plan.
Workers choose a percentage of their income to contribute. The money invested is tax-deferred. This means no income taxes are paid upfront.
However, withdrawals during retirement are taxed. Roth IRAs allow people to save a specific dollar amount every year. Contributions are made with after-tax dollars.
Investments then grow tax-free. Once you’re ready to retire, most of the money in your Roth IRA will be growth.
Dave Ramsey’s investment tips
So, no taxes on that growth means hundreds of thousands of dollars stay in your pocket and out of Uncle Sam’s,” Ramsey explained. In 2025, a person can invest up to $7,000 per year in a Roth IRA. Those aged 50 or older can contribute an additional $1,000.
The 2025 contribution limit for 401(k) plans is $23,500. Those 50 or older can make an additional catch-up contribution of $7,500, for a total of $31,000. Employer matching contributions are a significant advantage of 401(k) plans.
They effectively double a worker’s investment up to a certain percentage. An employer match is free money, and you simply don’t leave free money on the table,” Ramsey advised. “If you’re eligible for a 401(k) and a Roth IRA, the best-case scenario is to invest in both accounts.
That way, you’re taking advantage of your employer match and getting the tax benefits of a Roth IRA,” he said. Ramsey’s advice highlights the importance of using 401(k)s and Roth IRAs. Together, they can help build a strong retirement savings strategy.
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