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Dave Ramsey advises claiming Social Security at age 62 and investing the money.
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Claiming at age 62 instead of age 70 reduces benefits by 43% ($1,400 versus $2,480 on a standard $2,000 benefit).
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Early filing penalties reduce benefits by 30% if the FRA is age 67. Delaying until age 70 increases benefits by 24%.
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Have you read the new report that is shaking up pension plans? Americans answer three questions and many realize they may retire earlier than expected.
Dave Ramsey was very clear about when you should apply for Social Security. Both on podcasts and on the Ramsey Solutions blog, the financial expert has expressed a consistent preference for the claim age he believes is right.
Unfortunately, the data does not support its recommendations. In fact, this shows that Ramsey is completely wrong about the best age to start your Social Security checks. Following Ramsey’s advice on this issue could prove to be a costly mistake, so it’s worth examining what the research actually shows versus what Ramsey suggested.
Ramsey advised his readers and listeners to claim Social Security at age 62. There were several different justifications for this decision:
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He suggested that you should apply for your money early and, if you don’t need to use the money immediately, invest it, because the returns you earn from investing could net you more money than you would get if you waited to apply for benefits and the government increased your check due to the delay.
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He said you should apply for benefits early because they stop when you die, so it’s best to collect them while you can.
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He believes that, given most people’s life expectancies, they will likely have more money if they start receiving checks at age 62 instead of delaying them.
Since 62 is the earliest age you can start your payments, Ramsey advises you to make a decision that would result in the highest possible early filing penalties. These penalties reduce benefits for each month you claim them before full retirement age. He also suggests that you give up the delayed retirement credits you can earn when you delay applying for Social Security benefits beyond your FRA.
Early filing penalties reduce benefits for each month you claim before FRA, resulting in a 30% reduction in your standard benefit if you claim at age 62 and your full retirement age is 67 (which is the case if you were born in 1960 or later). It is a considerable success. On the other hand, delayed retirement credits increase benefits for each month you wait, so delaying until age 70 would increase your standard benefit by 24%. To understand the impact, look at the numbers. If you were on track to get a standard $2,000 benefit, following Ramsey’s advice would mean collecting just $1,400 per month instead of the $2,480 you could have received by delaying until age 70.
