Dave Ramsey bluntly warns Americans on Social Security, poverty

In 2024, approximately 171 million American workers paid Social Security taxes, and nearly 72.9 million Americans received Social Security benefits.

Personal finance bestselling author Dave Ramsey has a strong warning about the federal program. He wants people to understand what it is  — and what challenges regarding Social Security await them in the future.

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The Social Security Act became law in 1935 with the purpose of providing financial protection for retired Americans, those with disabilities, and survivors of a breadwinning family member who has passed away.

Workers pay Social Security as an automatic deduction amount depending on how much income they make. 

Related: Dave Ramsey speaks bluntly on 401(k)s and IRAs for retirement

But the money one contributes to Social Security from those taxes is not saved away for them in the future. The Social Security Administration (SSA) pools the money currently raised by those taxes and, with those funds, pays current beneficiaries.

Ramsey cautions Americans working and paying these taxes now that there are some important facts of which they should be aware.

Ramsey warns workers on some Social Security realities

According to an SSA fact sheet, there were 2.7 covered workers for each Social Security beneficiary in 2023. By 2035, that number will shrink to 2.4. 

That’s largely because, during the next 10 years, millions of baby boomers will retire. 

In addition, Ramsey explains that the Social Security trust funds have only enough value to fully fund the program until 2034. Unless legislative action is taken, the result will be that beneficiaries will only receive 80% of their currently expected monthly paychecks.

“The future of Social Security is unpredictable to say the least,” Ramsey wrote. “Something’s wrong with this picture, people!”

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The Ramsey Show host reminds future retirees that Social Security income was never intended to be enough for one to live entirely on during retirement. 

Social Security is to be viewed as a useful supplement to retirement savings, which can be beefed up by taking advantage of employer-sponsored 401(k)s and tax-advantaged IRAs during one’s working years.

And Ramsey has another word of warning about the necessity of getting started early on retirement savings.

Related: Suze Orman warns U.S. workers on Social Security, 401(k) change

Dave Ramsey explains Social Security and the poverty line

Ramsey observes that in July 2024, the average Social Security monthly paycheck for retired people was $1,918. That works out to $23,016 per year. 

Meanwhile, for a two-person household, the national poverty line is $20,440.

“Listen, if your plan is to depend on the government to help you retire with dignity, then you need a new plan,” he wrote.

Workers saving for retirement often find themselves realizing they need to work and save well into their sixties. While people can claim Social Security beginning at age 62, their monthly benefits increase the longer they wait.

Retiring later also gives people more time to save and invest during their final years of work. 

Still, others find that even though they plan to work and save until their full retirement age (for most people this is 67 years old), other factors force them to start collecting Social Security benefits earlier.

For example, one might experience a work layoff or sudden health condition. 

Many healthy Americans are able to work until 70 (the final year one can claim Social Security). And those monthly benefits are even higher than if they would have started collecting Social Security at 67.

Another option is to continue to work while receiving Social Security benefits. 

But that comes with one important factor to consider: Above a certain amount a person earns (in 2024 it was $22,320), benefits are reduced by $1 for every $2 they earn.

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