Dave Ramsey’s Social Security Advice Could Cost You $182,370. Here’s Why

Dave Ramsey has given advice on a lot of different financial issues, and some of that advice is questionable, like the idea that you don’t need a credit score.

Some of his worst advice, though, relates to when to claim Social Security.  Ramsey has repeatedly made a suggestion about when to claim benefits that could cost you a fortune and put your retirement security at risk.

Here’s what Ramsey said, along with details on why listening to his advice could be so costly. 

Here’s Ramsey’s recommended age to claim Social Security  

In a 2019 podcast, Ramsey recommended claiming Social Security at 62. Since that’s the earliest age when you can claim retirement benefits, listening to Ramsey’s advice would mean starting your checks ASAP and well before your full retirement age, which is when you become entitled to your standard benefit.

This advice is surprising — especially since it wasn’t just a one-off comment made on a podcast. This is also the official position published on the Ramsey Solutions blog,  which says: “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 blog goes on to suggest that you should start receiving your benefits ASAP, but try to invest the money if you can. The problem is that this advice is absolutely terrible — and it could cost you a lot more than you’d think. In fact, it could cost the typical retiree as much as $182,370. 

Why is Ramsey’s advice so costly?

Ramsey’s advice is a huge problem because the actual research shows the vast majority of seniors should not claim Social Security at 62. They should start checks at 70.

In fact,  data from the National Bureau of Economic Research is extremely clear that waiting until the age of 70 is the optimum choice for more than 90% of working-aged Americans.  The NBER data reveals that those who claim at a suboptimal time end up losing out on $182,370 in median household lifetime discretionary spending because of that choice.

By contrast, optimizing, or waiting, would result in the typical worker getting to increase their lifetime spending by 10.4.% while one in four workers would see lifetime spending gains above 17% and one in 10 would see lifetime gains of 26%. 

The reason for this is simple. The system that was created to try to equalize lifetime Social Security benefits for early and late filers was devised when life expectancies were a lot shorter. Since people are now living longer,  more people benefit by putting off their claim, getting the larger benefit later, and collecting it for more years than they’d need to break even for missing earlier benefits. 

Giving up the chance at this extra money makes little sense, particularly because if you were the higher earner in your household, an early claim would also shrink the survivor benefits you leave behind for your widow.

Now, while Ramsey says you can end up with more money by claiming and investing, that puts you at serious risk of loss, especially given you’ll need to rely on the money to fund your retirement at some point and can’t necessarily wait for a recovery if your timing goes wrong and you need to access your investment income at a bad time. 

Of course, there may be some circumstances where a claim at 62 does make sense. But the idea that everyone should make an early claim, even if they plan to invest the money, is simply not grounded in reality. Retirees should not listen to this Ramsey advice and should instead work with a skilled financial advisor to help them make the claiming choice that is best for them.