Dave Ramsey Says These Three Retirement Mistakes Are Costing Americans the Most
Most Americans assume they can handle a few lingering payments once they stop working, but Dave Ramsey argues that a single car loan could quietly drain over $200,000 from your retirement savings before you ever notice the damage.
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A retiree with a $600 monthly car payment needs more than $600 a month to cover it. Say the money comes out of a traditional 401(k) and is taxed at an example 12% rate. Then the real withdrawal is about $682 a month, or roughly $8,182 a year. Dave Ramsey has spent years warning about exactly this kind of hidden cost.
Financial radio host Dave Ramsey laid out his standing advice for Americans close to retirement in an interview with Kiplinger. It comes down to three mistakes: carrying debt into retirement, leaving work before you’re ready, and leaning too hard on Social Security. Debt is the most expensive because it drains your savings every month.
Debt Payments Quietly Eat Six Figures of Savings
Here is how Ramsey describes the first mistake: “They hang onto debt. Especially mortgages and car payments. Then they assume they’ll just ‘manage it’ in retirement.”
A lot of households are making that assumption. Vishesh Raisinghani of Moneywise references AARP’s reading of the Federal Reserve Survey of Consumer Finances, which puts the average debt burden for households headed by someone aged 65 to 74 at $45,000.
The oldest households have seen the biggest change. In the same AARP comparison, Vishesh Raisinghani reports that average debt for households led by someone 75 and up grew from under $5,000 to $36,000 between 1992 to 2022.
A common planning rule says you can safely take about 4% of your savings each year. To cover the $8,182 yearly car payment, you’d need roughly $204,545 set aside just for that one loan. If you pay it off before retiring, that money covers groceries, insurance, and travel instead.
Your tax rate determines how much you must take for each dollar of payment. Ramsey’s fix: “Attack that debt with intensity now, before you step into your golden years.”
Retiring at 55 Opens a Decade-Long Health Coverage Gap
Ramsey’s second warning is short: “Don’t retire until you’re truly ready.” Plenty of people plan to leave early anyway. Vishesh Raisinghani reports that roughly 18% of respondents in a 2024 YouGov survey said they plan to retire at or before age 55.
Ramsey points to two risks. First, health insurance. Medicare starts at 65. A person retiring at 55 must find and pay for coverage on their own for 10 years. At that age, premiums can be one of the largest items in a household budget.
Second, time. Retiring at 55 means paying for 35 years of retirement instead of 25. You also lose working years of contributions and compound growth, raising the odds that you outlive your money.
Social Security Works Best as a Floor Under Your Plan
Ramsey said the funds behind Social Security were earning a “negative return” and the system was never designed to be anyone’s whole retirement plan.
The 2026 Social Security Trustees Report projects the Old-Age and Survivors Insurance Trust Fund reserves will run out in the fourth quarter of 2032, according to Moneywise.
Social Security continues paying after that date. Ongoing payroll tax income would still cover 78% of scheduled benefits if Congress makes no changes, according to Moneywise. The checks continues coming, just smaller.
A scheduled benefit of $2,000 a month would drop to $1,560, a gap of $440 a month or $5,280 a year. How much that hurts depends on how much of your income comes from the check. If Social Security pays most of your bills, you feel the full cut. If your savings cover most spending, you barely notice it.
Three Moves to Make Before Your Last Paycheck
- Figure out what each debt really costs in withdrawals. List every balance, interest rate, and monthly payment. Divide each payment by one minus your expected tax rate on withdrawals to determine the actual amount you’d pull from your accounts. Decide which debts you can clear before retirement.
- Price your health coverage before you pick a retirement date. Get real premium quotes on HealthCare.gov for your age and ZIP code for every year between your target date and 65, and add those costs to your retirement budget.
- Test your budget with a smaller Social Security check. Pull your benefit estimate from my Social Security at SSA.gov. Multiply it by 78% and see whether your monthly budget still works, according to Moneywise.
Next, watch whether Congress acts on Social Security funding, since any fix will change how much of your scheduled benefit you can count on.
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Chris Lange is a financial and geopolitical writer with more than a decade of experience covering a myriad of topics. He has published thousands of articles for 24/7 Wall St., with past coverage focused heavily on stocks, IPOs, healthcare, defense, global affairs, and technology.
His work has been quoted, or referenced by a number of outlets including Business Insider, USA Today, Yahoo Finance, MSN, The Motley Fool, and many other publications. A graduate of Southwestern University, he studied business with a focus on investments and has previous experience in banking and startups.
When not reading or writing the news, he is following his passion for Lacrosse, playing chess, or building solar projects with his dad.
