Dave Ramsey Has 2 Reasons Why You Should Claim Social Security at 62. They’re Both Wrong

When you turn 62, you become eligible to claim your Social Security benefits. Most financial experts strongly advise that you wait to start your checks, despite the fact you could file for benefits to begin ASAP. However, finance expert Dave Ramsey has taken a different stance. 

On the Ramsey Solutions blog, there are two specific reasons listed that explain why you should claim benefits at 62. Unfortunately, both of those reasons are wrong. Here are the two listed reasons, along with some details on why both are so problematic. 

1. You should claim benefits early in case you die young

The first big reason Ramsey says to claim Social Security benefits early is that you should try to grab the money while you are still alive. 

“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,” the Ramsey Solutions blog reads. 

The first big problem with this advice is that it’s wrong. When Social Security was created, a system of early filing penalties and delayed retirement credits was included to try to ensure that you could claim at any age and still get the same benefits as someone who claimed earlier or later. But, life expectancies have changed since this system was put in place, and now research shows that as many as 90% of current workers will end up with more lifetime Social Security income if they wait until 70. 

So, while Ramsey said to grab the money before you die, odds are that you won’t die before you break even for the delayed start to your benefits, and you could end up with hundreds of thousands of dollars in extra discretionary income if you delay your claim. 

The second big problem with this advice is that it could end up putting your spouse in a bad spot.

If you are the higher earner and you die first, your spouse gets survivor benefits. Unfortunately, if you claimed early, you would have shrunk those benefits, leaving your spouse with far less than if you’d waited. You want to maximize the money your widow or widower gets if you pass away first and you made more money during your working life, because otherwise they may struggle financially when you are gone.

2. You should claim benefits early and invest

Ramsey’s second argument for claiming early is that you can get the money and start investing it. This may be an even worse reason to claim benefits at 62. There are a huge number of problems with this suggestion. 

First, you are going to need money to live on. There are limits to how much you can work when you are collecting Social Security if you are under your full retirement age, so if you claim benefits and try to invest the money, where exactly are the funds supposed to come from for you to pay the bills? Sure, you could theoretically live off some of your investments while claiming Social Security to invest the amount you collect in benefits — but that seems pointless to invest your benefits, as you’re drawing more from your investments to cover the bills that the benefits could cover. 

Second, investing a lot of money in retirement is usually considered to be pretty high risk. Most people are starting to move some portion of their portfolio out of stocks, but Ramsey is suggesting that you claim Social Security and invest this money to earn high returns — discounting the fact that if the market goes south and you don’t have time to wait for recovery, you’ll lock in losses as you have to sell those investments to generate income to live on.

Third, if you delay a Social Security claim, you increase your monthly benefit for each month that you wait until age 70. This is a guaranteed increase. So you are giving up a sure thing to invest and just hoping that all goes well. 

Neither of these arguments is a good reason for you to start Social Security at 62. You should not listen to Ramsey’s advice and should instead likely wait as long as possible to start your  Social Security checks to give yourself the best odds of the retirement security you deserve.