I do not always agree with the advice Dave Ramsey gives on his show. Many financial situations are complex, and there is rarely a single magic solution that a professional can offer. Opinions and viewpoints will always show through, and it is perfectly fine not to see eye to eye with any pundit on every topic. Still, there is one potentially controversial Ramsey viewpoint that I fully support, and that is taking Social Security at 62, which is the earliest age you can file.
Delayed gratification is often a smart financial choice. If you wait beyond 62, your monthly Social Security benefit will be higher. But the value you get from that money at different stages of your life is not the same. The utility, meaning the enjoyment or satisfaction you gain, might be significantly greater in your early 60s, even if the amount is smaller. For many people, spending a modest benefit earlier can deliver far more life value than waiting for a larger check later.
Key Points About This Article
- Taking social security at 62 may be controversial, but it can be the right move for those who value financial flexibility.
- Investing your social security could help you grow your nest egg at a quicker pace.
- Also: See how a qualified financial advisor can help you optimize your Social Security and retirement income plan (Sponsored)
Taking social security sooner rather than later? Why it can make more sense than delaying.
If you are in good health, there is a strong argument for taking the money sooner rather than later, especially since unexpected health issues become more likely as you age. If you can travel and enjoy a wide range of activities in your early 60s, it can make sense to collect a smaller benefit now rather than wait for a larger one later.
The time value of money may also work more in your favor at age 62 than you might expect. Even so, the decision to claim Social Security early is very personal, and the right choice depends heavily on your unique circumstances. Many people who reach 62 today may live well into their late 80s or 90s, and if you are confident that your health will hold up, delaying benefits can still be a sensible option.
Either way, you have meaningful flexibility. You can choose to file or wait, year by year, based on your needs, preferences, or any sudden changes in your life.
Now, let’s return to Dave Ramsey and explore why he believes taking Social Security at 62 can be a smart move. In this piece, we will outline several reasons that support the case for collecting earlier rather than later.
Take the money and invest it!
| Claiming Age | Monthly Benefit (as % of FRA Benefit) | Pros | Cons |
|---|---|---|---|
| 62 | 70% | – Receive benefits early – Can use income if retiring early |
– Reduced monthly benefit for life – May not maximize lifetime benefits if you live long |
| FRA (66-67 depending on birth year) | 100% | – Full monthly benefit – No reduction for early claiming |
– No early access to funds – Lower than benefits at age 70 |
| 70 | 124% | – Maximized monthly benefit – Ideal for those with longer life expectancy |
– Delay in receiving benefits – May not be optimal for those with shorter life expectancy |
Even if you don’t need extra cash today to support your lifestyle, you can take the cash today and invest it in a way that may just bag you a greater return over the long haul. Even if you expect to live to 100, taking the cash at 62 and investing it wisely can not only literally pay huge dividends, but it may just put you on the fast track to a more comfortable retirement.
Additionally, having the cash on hand allows you greater flexibility to change up the budget should unforeseen financial costs hit from out of nowhere. Ramsey thinks retirees should factor in flexibility as a part of their decision regarding when they start taking social security payments.
Either way, having some extra cash to invest in solid blue chips, I believe, makes a lot of sense, especially if you have a chance to deploy the funds on bargains after sharp market sell-offs. Just think of the opportunity that extra cash would allow you if a 2020 stock market crash and ensuing V-shaped recovery were to happen again.
Even if you’re not looking to buy stocks in times of extreme undervaluation, stashing the funds in a simple, low-cost index fund may suffice. Ramsey thinks that early social security payments invested in a “good mutual fund” could score better results than someone who waits until 70 before collecting.
In short, Ramsey’s in the camp of taking social security early. If you value investment opportunities and financial flexibility, and, perhaps most importantly, you can stomach the risk that comes with investing your social security funds in markets, perhaps taking social security at 62 makes sense for you.
The bottom line
As with most topics in personal finance, there is no right or one-size-fits-all solution. So, don’t take the advice of Dave Ramsey without putting on your own homework and meeting with a financial advisor who can better grasp your situation, concerns, and ambitions.
If you want more cash to invest through your 60s and value flexibility, maybe Ramsey’s advice of taking social security at 62 is one of the most brilliant pieces of advice he’s given!
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