Dave Ramsey says you can take Social Security at 62 if you invest all of it. But most people can't do this, and many who can probably shouldn't.
You get to choose when to claim your Social Security benefits, but the consensus among most financial professionals is that delaying your claim for as long as possible is the best move. Although you can start getting benefits at 62, the amount you get goes up every month you delay until 70. For most people, waiting gives you the best chance at maximizing the lifetime income these benefits offer.
There's one financial guru who has some different advice, though. Dave Ramsey has suggested that taking Social Security at 62 (the earliest age available) is actually a good move in some situations. The problem is, most people can't really follow Ramsey's advice -- and those who can perhaps shouldn't, as it could put them at unnecessary risk of financial loss.
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Here's when Ramsey said you can claim Social Security at 62
Ramsey commented on the issue of when to claim Social Security in response to a question he received on a podcast in 2019. The question focused on whether to start retirement benefits at 62 or wait until full retirement age.
In response, Ramsey said that "it usually makes sense to take it early if you're going to ... invest every bit of it."
Specifically, he advised claiming your benefits and then putting all of the money into a good mutual fund. He said doing so will more than make up for the extra money that would have been included in your Social Security checks if you'd waited longer to claim them.
Here are the big problems with Ramsey's advice
While Ramsey's advice, in theory, might seem smart, there are a few really big problems with it.
For one thing, most people who are considering taking Social Security at 62 are doing so because they need the money to cover the bills if they want to retire. They can't just make their early claim and invest the funds.
The other, bigger issue, though, is that an increase in your Social Security benefits due to delay is a sure thing. If you claim at 67 or 70 instead of 62, it is guaranteed that your monthly checks will be larger than if you filed earlier. In fact, you will definitely get more money in each check if you delay claiming even a month beyond the time you become eligible for Social Security.
So, if it turns out you need to start your payments at 64 or 65 or 66 instead of waiting as long as you'd hoped, you'd still have a higher benefit as a result of having waited. And any future Social Security raises will be be based on the higher benefit you earned due to delay, so your choice will continue to pay off over time.
Making money by investing your Social Security, on the other hand, is not a 100% sure thing. In fact, a lot could go wrong. You may not actually follow through with investing every dollar, even if you have good intentions. Even if you do invest it all, returns from the stock market might not be as high as they've been in the past.
As a general rule, you shouldn't really be investing money you're going to need to live off within the next couple of years in the stock market. There's too great a chance you could buy into the market when stock prices are up, then find yourself facing a prolonged downturn that leaves you forced to choose between locking in losses or holding off on withdrawing funds until a market recovery that could take years to happen.
If you take Social Security at 62 with the goal of investing and you end up needing more money at 64 because of a health issue or other pressing financial needs, you'll have permanently shrunk your Social Security benefit. And, if the market was at its peak when you started investing your Social Security benefits and it's since tanked and not recovered, you could have lost money on your investments. Those losses would become permanent if you had to sell your stocks to help cover living expenses.
The bottom line is, Social Security is a guaranteed lifetime benefit. And retirees can't afford to take unnecessary risks with retirement money they're going to need in a few years' time. So, rather than gambling on claiming Social Security, investing, and hoping everything goes right, it makes a whole lot more sense for most people to get the guaranteed income boost that comes with a later Social Security claim.
FAQs
The Importance of Planning Ahead
“This is not a decision you can just shelve until you are 61,” Orman wrote. “If you haven't made plans to delay claiming your Social Security at that point, chances are you will just go ahead and start at 62. It takes planning to be able to delay starting to collect your benefit.
What does Dave Ramsey say about investing in retirement? ›
Investing Principle 2: Invest 15% of your income in tax-advantaged retirement accounts. Once you've completed the first three Baby Steps, you're ready for Baby Step 4—investing 15% of your household income in retirement. This is where things get really exciting!
What is the average Social Security check? ›
As of March 2024, the average retirement benefit was $1,864.52 a month, according to the Social Security Administration. The maximum payout for Social Security recipients in 2024 is $4,873 a month, and you can only get that by earning a very high salary over 35 years.
Is it better to take Social Security at 62 and invest it? ›
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.
What is the Social Security 3 year rule? ›
The rules are as follows: Before age 24 - You may be eligible if you have 6 credits earned in the 3-year period ending when your disability starts. Age 24 to 31 – In general, you may be eligible if you have credit for working half the time between age 21 and the time your disability began.
How much of your retirement income should normally come from Social Security? ›
On average, Social Security will replace about 40% of your annual pre-retirement earnings, although this can vary based on each person's circ*mstances. Learn more at www.ssa.gov/planners/retire. Social Security covers about 96% of American workers. To learn more about Social Security, visit www.ssa.gov.
What is the $1000 a month rule for retirement? ›
One example is the $1,000/month rule. Created by Wes Moss, a Certified Financial Planner, this strategy helps individuals visualize how much savings they should have in retirement. According to Moss, you should plan to have $240,000 saved for every $1,000 of disposable income in retirement.
How much does Suze Orman say you need to retire? ›
Suze Orman is right. In order to retire early, you need at least $5 million in investable assets. With interest rates so low, it takes a lot more capital to generate the same amount of risk-adjusted income.
How much does Dave Ramsey say you need to retire? ›
Some folks will need $10 million to have the kind of retirement lifestyle they've always dreamed about. Others can comfortably live out their golden years with a $1 million nest egg. There's no right or wrong answer here—it all depends on how you want to live in retirement!
At what age is Social Security no longer taxed? ›
Yes, Social Security is taxed federally after the age of 70. If you get a Social Security check, it will always be part of your taxable income, regardless of your age. There is some variation at the state level, though, so make sure to check the laws for the state where you live.
Average Retirement Spending
According to the Bureau of Labor Statistics (BLS), the average income of someone 65 and older in 2021 was $55,335, and the average expenses were $52,141, or $4,345 per month.
How do I get the $16728 Social Security bonus? ›
Have you heard about the Social Security $16,728 yearly bonus? There's really no “bonus” that retirees can collect. The Social Security Administration (SSA) uses a specific formula based on your lifetime earnings to determine your benefit amount.
What is the #1 reason to take Social Security at 62? ›
1. You're Planning Your End-of-Life Care. Your Social Security benefits stop paying at your death, so if you die before collecting benefits, you'll have missed out on benefits entirely.
What to do when Social Security is not enough to live on? ›
Has your income declined or have you experienced a loss of financial resources? You may be able to get additional income through the Supplemental Security Income program, which helps seniors and the disabled who have limited income and financial resources.
What is the 5 year rule for Social Security? ›
If you become disabled before your full retirement age, you might qualify for Social Security disability benefits. You must have worked and paid Social Security taxes in five of the last 10 years.
What does Dave Ramsey say about taking Social Security? ›
Here's when Ramsey said you can claim Social Security at 62
In response, Ramsey said that "it usually makes sense to take it early if you're going to ... invest every bit of it." Specifically, he advised claiming your benefits and then putting all of the money into a good mutual fund.
At what age does it make sense to take Social Security? ›
You can start your retirement benefit at any point from age 62 up until age 70. Your benefit will be higher the longer you delay your start date. This adjustment is usually permanent.
When should I let Social Security know I am retiring? ›
You can apply for retirement benefits up to 4 months before you want to start receiving your benefits. Even if you are not ready to retire, you still should sign up for Medicare 3 months before your 65th birthday.
Does it make financial sense to take Social Security early? ›
If you expect to have a shorter life expectancy, then early withdrawals might make sense. If you live longer than average, starting Social Security later can be particularly beneficial.
