Here’s How to Make Dave Ramsey’s Controversial Social Security Advice Work for You

One of the hardest financial decisions retirees have to make is figuring out when to start collecting Social Security. And the reason that decision is so tough is because it has lifelong repercussions.

You’re eligible for your monthly Social Security benefits in full at age 67 if you were born in 1960 or later. That’s considered your full retirement age, or FRA.

If you delay your Social Security claim past FRA, your monthly benefits get boosted and grow 8% a year until you turn 70. But if you claim Social Security before reaching FRA, your benefits will be slashed permanently.

Age 62 is the earliest you can sign up for Social Security. And surprisingly, financial guru Dave Ramsey calls that the optimal age to file for benefits.

There’s a reason for Ramsey’s logic, but it’s pretty controversial. However, there is a way to make his guidance work for you.

Why Ramsey thinks retirees should claim Social Security at 62

You’d think someone as financially conservative as Dave Ramsey would be a fan of waiting on Social Security. After all, if you file early, you’re guaranteed to shrink your benefits on a monthly basis for life.

But Ramsey’s reasoning is this. The more individual monthly payments you collect from Social Security, the more total income from the program you might get in your lifetime.

You can’t predict your own life expectancy. But claiming Social Security early could put more money in your pocket in total if you don’t end up living a very long life. If you wait and pass away a few years after starting benefits, you could end up with a lot less money from Social Security despite boosting your checks quite substantially on a monthly basis.

How to make Ramsey’s advice pay off

Ramsey’s Social Security advice has some serious problems. First, while some people may pass away sooner than expected, you never know if you might live longer than expected. And reducing your Social Security payments could mean struggling later in life if your savings run out and your only monthly income stems from those benefits.

Also, a lot of people don’t even have retirement savings. If that’s the case, you may not be able to cover your essential bills on a reduced Social Security check.

But part of Ramsey’s advice on claiming Social Security at 62 is to take the money and invest it. That way, you give it more years in the market, and more time to earn strong returns.

Ramsey’s advice is once again flawed in this regard, because the typical Social Security recipient probably isn’t going to invest their benefits. Rather, they most likely need to use that money immediately.

But if you’re able to invest your Social Security checks, then claiming them early could be a smart move. If you start investing that money at 62, as opposed to waiting until age 70, and your portfolio generates double-digit returns, you could end up with more money by virtue of having that money in the market for longer.

And you don’t even need to be an investing genius to do what Ramsey suggests. Putting your money into an S&P 500 or total stock market ETF might grow it enough to make an early Social Security filing pay off.

Be honest about your intentions

If you’re thinking of claiming Social Security at 62, understand the risks of doing so. And be honest with yourself about whether you’re really going to invest the money or not.

If you think you’ll need those benefits to live on, then you may want to hold off and not file for them as early as possible. Otherwise, you could risk a major shortfall down the line.