Recent discussions surrounding the age to claim Social Security benefits have gained attention, especially following advice from financial expert Dave Ramsey, who suggests claiming benefits at age 62. However, research indicates that this strategy may not be in the best interest of most individuals. Data shows that approximately 90% of current workers could receive more lifetime Social Security income if they delay their claims until age 70.
Ramsey’s arguments center on two main points. First, he claims that individuals should take their Social Security benefits early to maximize their lifetime income, particularly in the event of an early death. He states, “In most cases, it actually makes more sense to take your retirement benefits sooner instead of waiting later. Why? Because your retirement payments die when you die… so you might as well take the money and make the most of it while you can.”
However, this perspective overlooks significant factors. The Social Security system was designed with early filing penalties and delayed retirement credits to ensure equitable benefits across ages. With changing life expectancies, research now suggests that those who wait until age 70 are likely to benefit financially in the long term. By delaying, individuals may secure hundreds of thousands of dollars in extra income over their lifetime.
Another key concern with Ramsey’s advice involves the potential impact on spouses. For higher earners, claiming early can reduce survivor benefits, which may leave a spouse in a precarious financial situation if the primary earner passes away. Maximizing these benefits is crucial, as it can significantly affect the financial stability of a surviving partner.
Investment Strategy Misconceptions
Ramsey’s second reason for claiming benefits early is to invest the funds. He advocates for taking benefits at 62 to begin investing immediately. This strategy, however, is fraught with challenges. The need for immediate cash flow can complicate this approach. For individuals under their full retirement age, there are strict limits on how much one can earn while collecting Social Security. This raises questions about where individuals would source their living expenses if they withdraw from investments while also receiving benefits.
Additionally, relying on investments during retirement carries inherent risks, especially if market conditions decline. Many financial advisors are currently recommending a more conservative approach, moving away from high-risk investments. By claiming Social Security early, individuals may sacrifice guaranteed increases in their monthly benefits that come with delaying claims.
Delaying Social Security enhances monthly benefits for each month that individuals wait until age 70. This is a guaranteed increase and represents a safer financial strategy compared to the uncertainty of investment returns.
In conclusion, while Dave Ramsey presents compelling reasons for claiming Social Security at age 62, evidence suggests that delaying benefits until age 70 is often the more financially sound choice. Individuals are encouraged to consider their personal circumstances and potentially consult with a financial advisor to navigate their retirement planning adequately. Research and expert opinions strongly indicate that waiting to claim Social Security can lead to greater financial security in the long term.
