IS IT BETTER TO TAKE SOCIAL SECURITY AT 62 OR 67? THE ANSWER IS SIMPLER THAN YOU MIGHT THINK. DAVE RAMSEY SAYS TAKE SOCIAL SECURITY AT AGE 62, BUT ONLY IF YOU DO THIS WITH EACH CHECK
PICTURED: DAVE RAMSEY
Person holding a mug and looking out a window.© Getty Images
It’s safe to say that financial guru Dave Ramsey is no fan of Social Security, having called the program a “stupid thing” and a “mathematical disaster” that “robbed” him of money for decades.
It’s no surprise that Ramsey goes against conventional wisdom on the age at which folks should claim Social Security benefits.
Let’s dig a little deeper into Ramsey’s thoughts on when you should start cashing in on your Social Security check!
Wealthy people know the best money secrets. Learn how to copy them.
Start Collecting Early
Ramsey says it’s fine to collect benefits as early as age 62 — something most financial experts advise against — if you take your checks and invest them. He claims that doing so will give you a greater return than you would get by waiting until a later age to apply for Social Security, which means you get a bigger monthly check.
“It usually makes sense to take it early if you’re going to … invest every bit of it,” Ramsey said in a 2019 podcast.
Ramsey was responding to a question from a listener about whether it made more sense to collect Social Security at 62 or wait until full retirement age, which is either 66 or 67 years old, depending on your birth year.
The way Social Security is set up, the longer you wait to collect retirement benefits, the higher your monthly payment. Claiming benefits at age 62 means you will get the smallest possible check. Your check rises yearly past age 62 if you wait to collect.
When you hit full retirement age you get the full benefits due based on the Social Security payroll taxes you contributed while working. The highest payment comes when you file at age 70, after which there is no more financial advantage to waiting.
Waiting until you are 70 years old to claim Social Security could boost your finances by more than $182,000, according to a recent study conducted by David Altig of the Federal Reserve Bank of Atlanta, Laurence Kotlikoff of Boston University and Victor Yifan Ye, a research scientist at Opendoor Technologies.
On the other hand, if you decide to collect as soon as you turn 62, you’ll receive a significantly reduced (by 30%) benefit for the rest of your life vs. waiting until full retirement age.
Invest Your Check
But according to Ramsey, you can more than make up for those shortfalls by applying for Social Security at 62 and then putting all of your checks into a “good mutual fund.”
“That one account will make you more than enough to cover up the difference between your [age] 66 account and your [age] 62 account,” Ramsey said on the podcast before going into a mini-rant about Social Security being a “broken system” and a “disaster.”
He didn’t say what constitutes a “good mutual fund” or offer suggestions on how to find one. There’s not a lot of info tracking average mutual fund performances over time, mainly because there are so many different types of funds, and their performances are all over the map
A 2020 blog on the Credit Donkey site reported that investors earned an average of 4.67% on mutual funds during the previous 20 years. That was well below the S&P 500 index performance over the same time frame. Over the past 30 years, the S&P 500 index has delivered a compound average annual growth rate of 10.7% per year, The Motley Fool recently reported.
But finding a “good” mutual fund might be tricky for Social Security recipients who are not financial experts and can’t afford to hire one.
Another thing Ramsey didn’t address was the fact that many Social Security recipients depend on their checks to help pay the bills, and they don’t have the financial wherewithal to put them into a mutual fund in the hope that the fund will provide good return years down the road.
source: https://finance.yahoo.com/news/dave-ramsey-social-security-age-125141707.html
When it comes to choosing what age to begin taking Social Security, you have plenty of options. You can file as early as age 62, or you can wait a few years and earn larger checks. Delay claiming until age 70, and you can maximize your monthly payments.
Two of the most popular ages to claim, though, are 62 and 67. Age 67 is the full retirement age for everyone born in 1960 or later, meaning it’s the age at which you’ll receive 100% of your benefit based on your work history.
But what’s the best age to begin taking benefits? While there’s no one-size-fits-all answer, there’s a simple question you can ask yourself to decide: What’s your biggest priority in retirement?
If your main goal is to retire early
Early retirement is a dream that many share, but it can be tough to achieve. Spending even a few more years in retirement could require tens of thousands of dollars more in savings — or even more if you live a longer-than-average lifespan.
Claiming benefits at age 62 will result in smaller monthly payments, but it can also make earlier retirement more manageable.
It is possible to retire in your early 60s and delay benefits. However, you’ll need to rely entirely on your savings and other sources of income in the meantime, and that risks depleting your retirement fund too quickly. When you take benefits at 62, it’s easier to retire early without dipping as much into your savings.
The added bonus of relying less on your savings is that it can help your money grow more over time. Your savings won’t stop building just because you’re no longer working, and the more you have in your account, the more your money will grow. By depending more on Social Security early in retirement, you can make the most of every dollar in your retirement account.
If you’re looking to maximize your income
One of the simplest, most effective ways to dramatically boost your retirement income is to delay claiming Social Security. Filing early will result in smaller checks, while delaying could boost your payments by hundreds of dollars per month.
In fact, according to 2023 data from the Social Security Administration, the average retiree collects around $1,884 per month in benefits at age 67 compared to $1,298 monthly at 62 — a difference of roughly $586 per month.
If you know your savings likely won’t last through retirement, maximizing your monthly payments can be a smart move. While relying solely on Social Security isn’t ideal, if it becomes your only source of income, larger checks can go a long way.
Delaying benefits can also be a good idea if you plan to continue working part-time in retirement. If you’re under your full retirement age and taking Social Security, your benefits could be temporarily reduced, depending on how much you’re earning from your job. While your benefit will be recalculated at your full retirement age, you may choose to simply delay benefits until age 67 to avoid those reductions in the first place.
Determining when to take Social Security is an incredibly important decision that will have a lifetime impact on your monthly payments. While there’s no single best age for everyone to file, considering your goals and priorities can make it easier to decide when to begin claiming.
The $22,924 Social Security bonus most retirees completely overlook
If you’re like most Americans, you’re a few years (or more) behind on your retirement savings. But a handful of little-known “Social Security secrets” could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $22,924 more… each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we’re all after. Simply click here to discover how to learn more about these strategies.
* IF YOU WERE TO DIE TODAY, WHERE WOULD YOU GO: HEAVEN OR HELL? IF YOU’RE NOT SURE, “BELIEVE ON THE LORD JESUS CHRIST AND THOU SHALT BE SAVED” FOR JESUS CHRIST SAID THE MOST IMPORTANT WORDS EVER SPOKEN IN THE HISTORY OF THE WORLD WHEN HE SAID, “FOR GOD SO LOVED THE WORLD, THAT HE GAVE HIS ONLY BEGOTTEN SON, THAT WHOSOEVER BELIEVETH IN HIM SHOULD NOT PERISH, BUT HAVE EVERLASTING LIFE.”
*SUPPORT THIS GREAT MINISTRY BY PURCHASING THE BOOK LETTERS TO YOUNG BLACK MEN BY DANIEL WHYTE III. ORDER IT FOR AS MANY YOUNG BLACK MEN IN YOUR LIFE AS POSSIBLE FOR THE GLORY OF GOD.
https://www.amazon.com/Letters-Young-Black-Men-Encouragement/dp/0976348799