Dave Ramsey Retirement Calculator
Plan your path to Baby Step 4 and beyond using compound interest.
Your Retirement Outlook
Total Nest Egg
Monthly Contribution
Understanding the Dave Ramsey Retirement Philosophy
Building wealth isn't a mystery; it's a series of intentional steps. In the Dave Ramsey world, retirement planning specifically falls under Baby Step 4. Once you have cleared all consumer debt (except the house) and established a fully-funded emergency fund, it is time to unleash the power of compound interest.
The 15% Rule
Dave Ramsey recommends investing exactly 15% of your gross household income into tax-advantaged retirement accounts. Why 15%? This percentage strikes a balance between building a massive nest egg for the future and having enough margin to pay off your mortgage early (Baby Step 6) and fund your children's college (Baby Step 5).
Where to Invest Your Money
The "Ramsey Way" suggests a specific order for your contributions to maximize tax efficiency:
- The Match: If your employer offers a 401(k) match, contribute enough to get the full match. That's an immediate 100% return on your investment.
- Roth Options: After getting the match, prioritize Roth IRAs or Roth 401(k)s. This allows your money to grow tax-free and be withdrawn tax-free in retirement.
- Traditional 401(k): If you still haven't reached your 15% goal after maxing out your Roth options, circle back to your traditional employer plan.
Realistic Returns and Growth Stock Mutual Funds
A point of frequent discussion is Dave's use of a 10% to 12% expected return. While the S&P 500 has averaged roughly 10-11% historically, inflation usually eats into that real purchasing power. When using this retirement calculator, you can adjust the "Expected Return" to see different scenarios. Most conservative planners might use 7% or 8%, while Ramsey enthusiasts often stick to 10% based on long-term historical averages of growth stock mutual funds.
Retirement Calculation Example
Let's look at a realistic scenario for a household following the Baby Steps:
- Current Status: 35 years old with $20,000 already saved.
- Income: $75,000 per year.
- Contribution: 15% ($937.50 per month).
- Time Horizon: 30 years (Retiring at 65).
- Growth: 10% annual return.
In this scenario, thanks to the mathematical "miracle" of compound interest, the household would retire with approximately $2,450,000. This demonstrates why starting early and staying consistent—even with a modest income—is the most effective way to become a "Baby Steps Millionaire."
Final Tips for Success
The key to the Dave Ramsey retirement strategy isn't just the math—it's the behavior. To reach these goals, you must stay out of debt. When you don't have car payments or credit card bills, 15% of your income becomes easy to manage. Use this calculator as a roadmap, but remember that consistency over decades is what ultimately builds wealth.