When it comes to money matters, many people listen to Dave Ramsey. He is a well-known financial expert who often shares his opinions on Social Security. Ramsey believes that Social Security is not a great program, calling it a “stupid thing” and a “mathematical disaster.” He has strong feelings about when you should start taking your benefits.
The Case for Collecting Early
Ramsey says it’s okay to start collecting Social Security benefits as early as age 62. This idea is different from what many financial experts recommend. Usually, they suggest waiting to get a bigger monthly check. But Ramsey believes if you collect your benefits early and invest them wisely, you could earn more money in the long run.
In a 2019 podcast, Ramsey explained, “It usually makes sense to take it early if you’re going to … invest every bit of it.” This means if you take your Social Security checks and put them into a good investment, you might make more money than if you wait to collect.
Social Security Benefits Overview
| Age to Start Collecting | Monthly Benefit (Approx.) | Percentage Reduction | Comments |
|---|---|---|---|
| Age 62 | Lowest | -30% | Smallest monthly check. |
| Age 66/67 | Full Benefits | 0% | Standard monthly payment based on contributions. |
| Age 70 | Highest | +32% | Maximum monthly payment. |
How Social Security Benefits Work
Social Security is designed to pay you more money if you wait longer to collect. If you start at age 62, you will receive the smallest check possible. Your payment increases each year until you reach full retirement age, which is either 66 or 67, depending on when you were born. The highest payment comes if you wait until age 70 to claim your benefits.
A study found that waiting until age 70 could mean receiving over $182,000 more throughout your life. However, if you choose to take your benefits at 62, you could end up with a check that is about 30% smaller than if you had waited until full retirement age.
Investing Your Checks
Dave Ramsey suggests that if you take Social Security at 62, you should invest all your checks in a “good mutual fund.” This means putting your money in a fund that can grow over time. According to Ramsey, doing this can help you make up for the smaller checks you receive if you start collecting early.
However, he didn’t explain what a “good mutual fund” is or how to find one. There are many kinds of mutual funds, and their performance can vary a lot. A 2020 blog noted that the average return on mutual funds was about 4.67% over 20 years, which is less than what the S&P 500 index earned during the same time period.
Challenges for Many People
Ramsey’s advice sounds good, but not everyone can follow it. Many people rely on their Social Security checks to pay for everyday expenses. They may not have enough money to invest in mutual funds or wait for their investments to grow.
Conclusion
In summary, Dave Ramsey believes that taking Social Security benefits at age 62 can be a smart choice, but only if you are ready to invest your checks. He argues that with the right investments, you can make more money in the long run. However, this plan might not be practical for everyone. Many people depend on their Social Security benefits to cover their monthly bills and may not have the means to invest. It’s essential to consider your own financial situation before deciding when to take Social Security.
FAQ’s
What is the best age to start collecting Social Security?
Most experts say to wait until full retirement age (66 or 67), but Dave Ramsey suggests starting at age 62 if you can invest your checks.
How much can my Social Security check increase if I wait?
If you wait until age 70, your monthly check can be significantly higher—up to 32% more compared to starting at age 62.
What should I do with my Social Security checks?
According to Dave Ramsey, you should invest your checks in a good mutual fund to potentially increase your overall retirement income.