Dave Ramsey's Stealth Social Security Strategy May Not Work For You

"You could sign up for benefits as early as age 62. But if you don't wait until full retirement age (FRA), which is 67 if you were born in 1960 or later, you'll face a permanent reduction in your monthly benefits. If your FRA is 67 and you claim Social Security at 62, your monthly checks will shrink by about 30%. That's a pretty big hit."

"Dave Ramsey is known for his anti-debt stance, and his guidance is often geared toward helping people achieve financial stability. As such, he's not one to be reckless with Social Security advice. Rather, Ramsey's advice is rooted in math. He says that if you claim Social Security at 62 and invest the money rather than hold out for the promise of larger monthly checks, you can come out ahead financially. And that's conceivable with the right investment portfolio."

"Ramsey's advice to claim Social Security at 62 makes a big assumption - that the typical beneficiary is comfortable investing and actually knows how. But in reality, a lot of people are clueless on how to invest. And choosing stable assets like bonds makes it less likely that you'll come out ahead financially by investing your benefits at 62 rather than waiting to file and locking in larger monthly checks."

"Plus, you never know how the stock market will perform. Even if you're comfortable building an investment portfolio, there's the risk of losing money or not having your assets grow as quickly as expected. When you wait on Social Security, you're guaranteed a certain annual boost to your monthly checks."

Social Security benefits can be claimed as early as age 62, but claiming before full retirement age causes a permanent reduction in monthly payments. For people with full retirement age of 67, claiming at 62 reduces monthly checks by about 30%. Dave Ramsey recommends claiming early because investing the benefits instead of waiting for higher monthly amounts could produce a better overall outcome, depending on the investment portfolio. The strategy assumes beneficiaries are comfortable investing and know how to manage risk. Many retirees may not be prepared to invest, and conservative choices like bonds may not outperform the guaranteed benefit increases from waiting. Stock market uncertainty can also reduce returns, while waiting provides a predictable annual boost to monthly checks.

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