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Ramsey recommends taking Social Security at age 62 and investing it instead of waiting until age 70 to collect larger benefits.
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Deferring from 62 to 70 would increase the $2,000 monthly benefit to $2,480 with no market risk.
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Most retirees need Social Security income to cover expenses and lack the discipline to invest every dollar.
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A recent study found that there’s one habit that can double Americans’ retirement savings and take retirement from a dream to a reality. Read more here.
Dave Ramsey is a financial expert and certainly has some great advice. For example, he often urges people not to spend money on things they can’t afford, especially not to buy expensive cars or rely on credit to pay for large expenses.
However, he also gave some very questionable advice. One thing I think Ramsey gets wrong is the age you should be collecting Social Security.
Ramsey recommends claiming the money at age 62 and investing it instead of waiting until older. The problem is, this isn’t a strategy that works for most people, and it may leave you making less money as a retiree.
When Ramsey was asked about when to claim Social Security, he responded, “If you’re going to…invest every bit, it usually makes sense to claim it early.” This happened on a podcast in 2019, and Ramsey explained that he would recommend this approach because he believes that investing the money can help you end up with more wealth in the long run, rather than simply waiting to claim Social Security benefits and letting them grow that way.
Unfortunately, there are a lot of problems with this advice. Here are some of them:
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It ignores human nature: most people are no If they collect Social Security at age 62, they’ll have every dollar invested. On the one hand, many people cannot afford to retire because they need Social Security. Most people aren’t that disciplined either. If you’re not investing every extra dollar of income you have available now, there’s no reason to think you’re more likely to do it with your retirement check.
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This is impractical: If you collect Social Security at age 62 and stop working, you may need the money to pay your bills. If you file for Social Security at age 62 and continue to work, you may eventually exceed your work limits and lose your benefits.
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This is risky: When you delay filing for Social Security, your benefits increase each month you wait because you avoid early filing penalties and you earn delayed retirement credits to boost your check. That’s a sure thing. There’s no doubt that if you wait until age 70 to take Social Security, your standard benefit will increase significantly compared to if you take it early. In fact, if your standard benefit when you fully retire at age 67 is $2,000 and you claim it at age 62, you’ll only get $1,400, but if you claim it at age 70, it’ll increase to $2,480. Unfortunately, if you invest, there’s no guarantee that you won’t time the market incorrectly and end up losing money over the eight-year period between the ages of 62 and 70.