# Dave Ramsey's 15% Retirement Savings Rule: Where the Money Should Go

Dave Ramsey recommends saving 15 percent of your gross income for retirement. This number comes from his Baby Steps financial framework, which prioritizes debt elimination before aggressive retirement investing. The question for most workers is not whether 15 percent is right, but where to deposit that money for maximum growth.

Ramsey's prescription assumes you have already eliminated consumer debt and established a small emergency fund. The 15 percent target translates to roughly $2,250 monthly for someone earning $180,000 annually, or $750 monthly for a $60,000 earner. Not everyone can hit this rate immediately, but Ramsey treats it as a long-term goal rather than a hard rule.

The venue matters as much as the amount. Ramsey typically directs savers toward employer-sponsored 401(k) plans first, especially when an employer match exists. A company that matches 3 percent of contributions offers free money. Ignoring it leaves retirement funds on the table. Workers should contribute enough to capture any available match before exploring other options.

After maximizing an employer match, Individual Retirement Accounts (IRAs) become the next logical step. Traditional IRAs and Roth IRAs both offer tax advantages that accelerate wealth building. A Roth IRA allows tax-free growth and withdrawals in retirement, making it attractive for younger workers in lower tax brackets. A traditional IRA offers an upfront tax deduction, reducing taxable income now. For 2024, savers can contribute up to $7,000 annually to an IRA, or $8,000 if age 50 or older.

Once both an employer 401(k) match and an IRA reach their limits, a worker should circle back to increasing 401(k) contributions. The 2024 limit sits at $23,500 annually for workers under 50, and $31,000 for those 50 and older. Some employers also offer Roth 401(k) options, which function like Roth IRAs but inside a workplace plan.

For self-employed individuals and freelancers, SEP IRAs and Solo 401(k) plans provide alternatives. A SEP IRA allows contributions up to 25 percent of net self-employment income, with a 2024 ceiling of $69,000. A Solo 401(k) works for business owners with no employees and offers similar flexibility.

Ramsey emphasizes avoiding high-fee mutual funds and actively managed accounts that drain returns through expense ratios. Low-cost index funds tracking broad market benchmarks like the S&P 500 or total stock market perform well over decades while keeping fees minimal. Vanguard, Fidelity, and Charles Schwab offer index-based retirement accounts with expense ratios often below 0.10 percent annually.

The order matters: employer match first, IRA second, then max out 401(k) contributions. This sequence balances accessibility, tax efficiency, and growth potential. Younger workers who start this pattern at 25 and invest consistently until 65 can accumulate over $1 million even with average market returns.

The real barrier for most people remains consistency. Hitting 15 percent requires discipline and prioritizing retirement over lifestyle inflation. Those who do stick with the plan tend to build substantial wealth by retirement age.