UpTrajectory Review
Dave Ramsey's retirement advice rarely changes, and TheStreet's Jeffrey Quiggle confirms it hasn't: fund your 401(k) to the employer match, max a Roth IRA, then return to the 401(k). The piece walks through why Ramsey favors this split — tax-deferred growth now versus tax-free withdrawals later — and why he believes most savers should hold both account types. Quiggle anchors the discussion in 2026 contribution limits, noting that workers under 50 can defer up to $24,500 into a 401(k) and $7,500 into an IRA, with higher catch-up thresholds for those 50 and older.
For small-business operators, this advice carries a wrinkle Ramsey's audience rarely faces: you are the employer. If you run an S-corp or LLC with employees, the match Ramsey tells workers to grab comes out of your payroll budget, not a corporation's. You must decide whether to offer a 401(k) at all, what matching formula to set, and whether Safe Harbor provisions make sense to avoid nondiscrimination testing headaches. Ramsey's sequence assumes someone else has already solved the plan-design problem. You haven't.
The Roth-first logic also deserves scrutiny for owners whose income swings year to year. If you take a modest salary in lean years, Roth contributions lock in low tax rates — genuinely smart. But if you pay yourself a high salary in strong years, deferring into a traditional 401(k) may beat Roth funding because you capture the deduction at a higher marginal rate. Ramsey's rule of thumb works for salaried employees with stable withholding. Owners with variable income should run the numbers annually rather than follow a fixed sequence.
The piece under-reports a second-order effect: retirement plans have become a hiring tool. In a tight labor market, a generous match signals stability and pulls candidates from larger firms. Conversely, skipping the match to preserve cash may save money today while raising turnover costs tomorrow. Owners should treat the match not as a personal-savings tactic but as a compensation line item with recruiting leverage. Solo operators without employees face a different math: a SEP-IRA or Solo 401(k) allows far higher contributions than the standard limits Quiggle cites, and Ramsey's framework ignores them entirely.
Watch whether Congress adjusts Roth rules in upcoming tax legislation, since lawmakers have repeatedly targeted backdoor and mega-backdoor conversions. Owners should also review their plan's vesting schedule and eligibility rules before promising matches to new hires. If you offer no plan today, request quotes from three providers this quarter and compare Safe Harbor 401(k) costs against a SIMPLE IRA. The tax code rewards those who act early; waiting until December forfeits months of deferral.
“Start by contributing enough to your 401(k) to get the full employer match, then max out a Roth IRA for tax-free growth.” — TheStreet
Takeaway: If you employ others, treat your 401(k) match as a recruiting cost and revisit Roth versus traditional contributions whenever your income shifts.
Excerpt from the original — TheStreet
Radio host and best-selling personal finance author Dave Ramsey has a straightforward recommendation for retirement savers considering 401(k)s and IRAs."A traditional 401(k) and a Roth IRA are two of the most powerful tools you can use to save for retirement," he wrote for Ramsey Solutions. "For most people, the best strategy is to use both a Roth IRA and a traditional 401(k) to save for retirement."And Ramsey offers a specific approach to help Americans begin their retirement savings accounts."Start by contributing enough to your 401(k) to get the full employer match, then max out a Roth IRA for tax-free growth," he wrote. "After that, you can return to your 401(k) to increase contributions."Ramsey explains the advantages of Roth IRAs and traditional 401(k)s."A Roth IRA is an account that allows you to save a certain amount each year for retirement," he explained. "But what makes a …