Disclaimer: This post provides general educational information about investing and retirement planning. It is not intended as personalized financial, investment, or tax advice. Investing involves risk, including possible loss of principal. Past performance is not indicative of future results. Consult a qualified professional before making financial decisions. For personalized investment or tax guidance, please contact Blueprint Investments and Tax Planning.
Assuming you create a plan, remain debt-free, and follow the plan consistently from now until the day you retire — retiring as a millionaire is not a fantasy reserved for high earners or lucky investors. It is the mathematically predictable outcome of one decision made consistently over time: investing 15% of your gross household income starting today.
Invest 15% of Your Income and Become a Baby Steps Millionaire — That’s Baby Step 4. And it’s where the Baby Steps shift from defense to offense.
The debt is gone. The emergency fund is fully funded. Every dollar you were throwing at creditors is now free — and if you put it to work consistently in the right accounts, ordinary income becomes extraordinary wealth over time.
The Retirement Crisis Is Real — and It Doesn’t Have to Be Yours
About 3 in 5 American workers — 58% — say their retirement savings are behind where they should be, with 37% saying they’re significantly behind, according to Bankrate’s 2025 Retirement Savings Survey. (source: Bankrate)
Current retirees have an average of just $288,700 saved — barely a third of the $823,800 they believe is needed to retire comfortably in 2026. Over a quarter of retirees — 29% — have no money saved for retirement at all. (source: Clever Real Estate)
Nearly half of all Americans with a 401(k) say they probably would not save for retirement at all without access to that workplace plan, according to the Investment Company Institute’s 2026 survey. (source: ICI)
This isn’t a distant, abstract problem. It’s the reality for millions of Americans who never had a plan. Baby Step 4 is your plan.
Why 15% — and Why Gross Income
Dave Ramsey recommends 15% of your gross household income — your pre-tax earnings — not your take-home pay. This matters because it establishes a consistent, meaningful savings rate regardless of your tax situation, and it’s calibrated specifically to allow you to simultaneously work toward paying off your home early in Baby Step 6 while still building real retirement wealth.
Fifteen percent is the minimum that produces millionaire outcomes over a full working career. It’s not a ceiling — it’s the floor that changes your future.
What annual household income do you need to retire a millionaire investing 15%?
The table below shows the minimum household income required to reach $1,000,000 by age 67 — investing exactly 15% of gross income from each starting age. All scenarios fit within 2026 IRS contribution limits — no taxable brokerage account required.
Note: Roth IRA eligibility is based on individual income for single filers and combined household income for married filing jointly (MFJ). High household incomes — even when split between two earners — may trigger phase-outs. See notes per row.
| Age | Years | Min. household income | Monthly 15% | How to allocate (2026 limits) | Roth IRA eligibility | At retirement |
|---|---|---|---|---|---|---|
| Age 25 | 42 yrs |
$27,000/yr
$2,250/mo gross
|
$338/mo
$4,050/yr total
|
All into Roth IRA
$4,050/yr — well under $7,500 limit Within limits ✓
|
Single: Eligible ✓
Phase-out: $153K–$168K MFJ: Eligible ✓
Phase-out: $242K–$252K Both well under limits at this income
|
$1,003,000+
|
| Age 30 | 37 yrs |
$40,000/yr
$3,333/mo gross
|
$500/mo
$6,000/yr total
|
Roth IRA first, remainder to 401(k)
$6,000/yr — well under combined limits Within limits ✓
|
Single: Eligible ✓
Phase-out: $153K–$168K MFJ: Eligible ✓
Phase-out: $242K–$252K Both well under limits at this income
|
$1,004,000+
|
| Age 35 | 32 yrs |
$60,000/yr
$5,000/mo gross
|
$750/mo
$9,000/yr total
|
Max Roth IRA ($625/mo)
+ 401(k) ($125/mo) $9,000/yr — under all limits Within limits ✓
|
Single: Eligible ✓
Phase-out: $153K–$168K MFJ: Eligible ✓
Phase-out: $242K–$252K Both well under limits at this income
|
$1,009,000+
|
| Age 45 | 22 yrs |
$137,000/yr
$11,417/mo gross
|
$1,713/mo
$20,550/yr total
|
Roth IRA ($625/mo)
+ 401(k) ($1,088/mo) $20,550/yr vs $32,000 available ✓ Within limits ✓
|
Single: Eligible ✓
Phase-out: $153K–$168K Income under limit MFJ — both earners:
If split evenly ($68.5K each) both eligible ✓ MFJ — single earner:
$137K household — eligible ✓ Phase-out: $242K–$252K |
$1,002,000+
|
| Age 50 | 17 yrs |
$238,000/yr
$19,833/mo gross
|
$2,975/mo
$35,700/yr total
|
401(k) + catch-up: $32,500/yr
+ Roth IRA + catch-up: $8,500/yr† $35,700/yr vs $41,000 available ✓ Catch-up limits required ✓
|
Single at $238K:
Over phase-out limit ✗ Backdoor Roth available† MFJ — both earners:
$119K each — both eligible ✓ Both well under $153K limit MFJ — single earner:
$238K nears MFJ phase-out Phase-out $242K–$252K Backdoor Roth may be needed† |
$1,001,000+
|
† Roth IRA income phase-outs & Backdoor Roth (2026): Direct Roth IRA contributions phase out between $153,000–$168,000 for single filers and $242,000–$252,000 for married filing jointly. If your income exceeds these thresholds, a Backdoor Roth IRA — contributing to a traditional IRA then converting to Roth — is a widely used and legal strategy that achieves the same tax-free growth outcome. This is especially relevant for single filers at age 50 ($238K) and MFJ single-earner households near the phase-out ceiling. Consult a qualified tax advisor before executing a Backdoor Roth conversion. Blueprint Investments and Tax Planning can help you determine the right approach for your tax situation.
Table assumptions
Return rate: 10.4% average annual return — the S&P 500’s 30-year historical average as of February 2026 (Fidelity). Dave Ramsey uses 11–12% in his examples.
Target: $1,000,000 portfolio balance at age 67 (full Social Security age). Social Security benefits would provide additional monthly income on top of this amount.
Household vs. individual income: Roth IRA eligibility is assessed per individual for single filers and on combined household income for MFJ. A dual-income household earning $137K combined may both be individually eligible for Roth IRA contributions even if the household total exceeds one earner’s threshold.
Income growth: Assumes flat income with no raises over time. Most households see income increase across their career — meaning actual required starting income could be lower, as future raises contribute more to the 15%.
Employer match: Reflects employee contributions only. Any employer match (e.g. 3%) is not included — actual portfolio outcomes could be meaningfully higher and the required starting income could be lower.
Contribution limits: Based on 2026 IRS limits. Ages 25–45 fit within standard limits. Age 50 requires maximizing catch-up contributions. Source: IRS IR-2025-111.
Inflation: Returns and contributions are shown in nominal (not inflation-adjusted) terms. Real purchasing power at retirement will be lower than the projected nominal balance shown.
Consistency required: Projections assume uninterrupted monthly contributions with no withdrawals, gaps, or loans against retirement accounts from the starting age through retirement.
Taxes: Does not account for taxes on traditional 401(k) withdrawals or the tax-free growth benefit of Roth accounts. Choosing Roth accounts improves net spendable retirement income beyond what the table shows.
This table is for educational purposes only. Results are estimates based on consistent returns and contributions, which are not guaranteed. Past performance is not indicative of future results. Consult a qualified financial professional before making investment decisions. For personalized guidance, contact Blueprint Investments and Tax Planning or schedule a free coaching consultation.
The Math That Changes Everything
Here’s what consistent investing actually looks like over time. Take Marcus and Elena, a couple in their mid-30s. Their combined household income is $85,000. Fifteen percent is $12,750 per year — $1,063 per month. Marcus’s employer matches 3%, adding another $212/month. Total monthly investment: $1,275.
At 10.4% average annual return — the S&P 500’s 30-year historical average per Fidelity — here’s what that looks like:
After 20 years: approximately $1,000,000. After 30 years: approximately $2,900,000. After 40 years: approximately $7,800,000.
Now take Sarah, a single teacher at 28 earning $52,000. Her 15% is $650/month with no employer match at the same 10.4% return:
After 20 years: approximately $515,000. After 30 years: approximately $1,500,000. After 37 years at age 65: approximately $2,600,000.
Neither scenario requires a six-figure salary. Both require consistency, time, and starting now.
Use the retirement projection calculator below to run your own numbers — plug in your current balances, monthly contribution, employer match, and retirement age to see what your specific financial future could look like.
The Investment Order — Best to Good
Dave Ramsey keeps it simple: match beats Roth, Roth beats traditional. Here’s the sequence:
Start with your employer-sponsored plan — 401(k), 403(b), or 457 — and contribute at least enough to capture the full employer match. That match is an immediate 50–100% return before a single dollar compounds. Never leave it on the table.
After capturing the full match, open a Roth IRA for you and your spouse if married, and max it out. The Roth IRA grows tax-free — contributions are made with after-tax dollars and qualified withdrawals in retirement are 100% tax-free. For most people expecting to be in a similar or higher tax bracket in retirement, this advantage compounds significantly over time.
If you’ve maxed your Roth IRA and still haven’t reached 15% of gross income, return to your 401(k) and increase contributions until you hit 15%.
If you’ve maxed your 401(k), Roth IRA, and all other available tax-advantaged accounts and still haven’t hit 15% of gross income, continue investing the remainder in a taxable brokerage account using the same diversified mutual fund approach. You’ll owe capital gains taxes on growth, but the alternative — stopping at the contribution limit and leaving money on the table — costs you far more in the long run. The goal is 15%. The account is secondary.
Why the Roth Advantage Is Real
Consider two investors — both 35, both investing $800/month for 30 years at 10.4%. The only difference is account type.
Investor A puts everything into a traditional 401(k). At retirement the account has grown to approximately $1,950,000. Every withdrawal is taxed as ordinary income. Assuming a 22% effective rate in retirement, the net spendable value is closer to $1,520,000.
Investor B maxes a Roth IRA first, then puts the remainder in a Roth 401(k). The account grows to the same $1,950,000 — but every dollar withdrawn is 100% tax-free. Net spendable value: $1,950,000.
Same contribution. Same return. A $430,000 difference in spendable retirement income — simply from choosing the right account type. That’s the Roth advantage, and it’s why Dave Ramsey prioritizes it in the investment order.
2026 Contribution Limits
The IRS announced that the amount individuals can contribute to their 401(k) plans in 2026 has increased to $24,500, up from $23,500 for 2025. Internal Revenue Service Knowing the full limits helps you plan exactly how to reach 15%:
For employees aged 50 and over, the catch-up contribution limit for 401(k) plans is $8,000 in 2026, with a higher limit of $11,250 applying specifically for those aged 60, 61, 62, or 63. Internal Revenue Service
The IRA contribution limit for 2026 is $7,500, with an income phase-out range for Roth IRA contributions of $153,000 to $168,000 for single filers and $242,000 to $252,000 for married couples filing jointly. Internal Revenue Service
Here’s the full picture for 2026 (source: IRS IR-2025-111):
401(k), 403(b), 457(b): $24,500 annually. Catch-up if age 50+: additional $8,000. Ages 60–63 specifically: additional $11,250. Roth IRA or Traditional IRA: $7,500 annually. IRA catch-up if age 50+: additional $1,000. SIMPLE IRA: $17,000 annually. HSA (high-deductible health plan): $4,400 individual / $8,750 family.
Dave’s Recommended Mutual Fund Mix
Diversification reduces risk without sacrificing long-term growth. Dave recommends spreading your investments evenly across four categories — 25% in each: Growth and Income funds (large cap), Growth funds (mid cap), Aggressive Growth funds (small cap), and International funds.
This mix balances stability with growth potential and spreads exposure across company sizes and geographies. Keep it simple. Invest in things you understand. Never borrow against your retirement accounts, and never invest in something because someone told you it was a sure thing.
What If You’re Starting Late?
If you’re in your 40s or 50s and feel behind, don’t let that stop you from starting today. The catch-up contribution limits exist precisely for this reason — and the math still works in your favor with consistent effort and intensity. Every year you delay costs more than the year before. The best time to start was years ago. The second best time is today.
The BluePrint Connection
Baby Step 4 is where the right investment advisor makes a genuine difference — not just in account selection, but in tax optimization, fund selection, and building a strategy around your specific timeline, income, and goals. My mentor C. Brunell at Blueprint Investments and Tax Planning works with portfolios starting at $10,000 for FPU readers and clients — well below the minimums at most advisory firms. Use their financial calculators to model your scenarios, and reach out when you’re ready for a personalized plan.
The Bottom Line
The retirement crisis is real. Your retirement doesn’t have to be part of it. The formula is straightforward: 15% of gross income, Roth first, always capture the match, diversified mutual funds, and start now. Follow the plan consistently from today until retirement — with no debt payments eating your income and no financial emergencies derailing your contributions — and the math works in your favor every single year.
That’s how ordinary people become Baby Steps Millionaires.
Schedule a free coaching consultation: calendly.com/amber-otting/consultation, or visit my Dave Ramsey RPC Coaching page.
Bibliography: Bankrate. (2025, October 22). 2025 retirement savings report. https://www.bankrate.com/retirement/retirement-savings-report/
Investment Company Institute. (2026, February 24). 401(k) plans drive retirement saving. https://www.ici.org/news-release/401k-plans-drive-retirement-saving
Clever Real Estate. (2026). 2026 retirement statistics. https://listwithclever.com/research/retirement-statistics/
Fidelity. (2025). S&P 500 average stock market return. https://www.fidelity.com/learning-center/trading-investing/sp-500-average-return
IRS. (2025, November 13). 401(k) limit increases to $24,500 for 2026, IRA limit increases to $7,500. https://www.irs.gov/newsroom/401k-limit-increases-to-24500-for-2026-ira-limit-increases-to-7500
Ramsey Solutions. (n.d.). Baby Step 4: Invest 15% of your household income for retirement. https://www.ramseysolutions.com/dave-ramsey-7-baby-steps/step-4
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Important Disclosure: The information shared in this blog post is for educational purposes only and should not be considered as personalized financial, investment, or tax advice. Investing involves risk, including possible loss of principal. Past performance is not indicative of future results. We do not guarantee the accuracy or completeness of any information provided. Before making any financial decisions, please consult with a qualified financial professional. For personalized investment or tax guidance, please contact Blueprint Investments and Tax Planning.
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