Claim Social Security at 62? Dave Ramsey’s Advice Looks Riskier as Benefit Cuts Loom

Financial guru Dave Ramsey has made a career for himself doling out financial advice. And while much of that centers on debt avoidance, Ramsey is also a big proponent of retirement security.

To that end, Ramsey frequently encourages readers and listeners to build nest eggs for the future and not just rely on government benefits like Social Security.

But the reality is that even people who do manage to save nicely for retirement often end up dependent on those benefits to cover their costs. For this reason, it’s important to claim benefits at the right time.

Ramsey has some controversial advice in the context of claiming Social Security. And that advice becomes even more questionable given Social Security’s shaky future.

Ramsey’s suggestion on Social Security

The earliest age you can claim Social Security is 62. But you won’t get your monthly benefits without a reduction unless you wait for full retirement age (FRA) to arrive. That age is 67 if you were born in 1960 or later. You can also delay Social Security until age 70 for larger monthly checks.

You’d think Ramsey would be a fan of delaying those benefits until 70 to score the largest monthly checks possible. But actually, Ramsey thinks it’s wise to claim Social Security at 62.

There are two reasons for this. First, as he points out, you only get to collect Social Security as long as you’re alive. So the sooner you start getting those checks, the larger your lifetime payday might be, especially if you don’t end up living very long.

Secondly, the sooner you start collecting benefits, the sooner you can invest the money if you don’t need it. Waiting several years could mean missing out on a lot of market gains.

Why Ramsey’s advice doesn’t work in light of potential Social Security cuts

Ramsey’s advice on Social Security isn’t necessarily spot on to begin with. For one thing, many people end up living well into their 80s and beyond. Anyone in that boat stands to come away with more lifetime Social Security income by waiting until 70 to file, as opposed to taking benefits early.

Secondly, a lot of people don’t invest, period. And folks who spend their entire careers living paycheck to paycheck are unlikely to suddenly land in a position where they can invest their Social Security benefits.

But Ramsey’s advice is even more questionable in light of potential Social Security cuts.

In the coming years, Social Security is facing a major financial shortfall due to a shrinking workforce. That could result in broad benefit cuts in less than a decade.

As it is, claiming Social Security at 62 results in a 30% reduction in payments compared to waiting until age 67 for people born in 1960 or later. But if benefits are reduced on top of that, people who file at age 62 could be left with very little money to live on. And seeing that many retirees don’t have savings and need Social Security to cover all of their expenses, that’s a dangerous thing.

Of course, Social Security cuts aren’t a given. There are solutions lawmakers can implement to prevent them from happening. But given that those cuts are on the table, planning to file for Social Security at 62 is downright dangerous for people without retirement savings.

And even if those cuts don’t happen, it’s still a risky thing to slash what could be your one guaranteed retirement income stream on a permanent basis. So unless you have no choice but to claim Social Security at 62, you may want to sit tight and take benefits later.