Social Security is a critical source of income for retired seniors. The Social Security Administration (SSA) says that among households aged 65 and over, 50% get at least half of their retirement income from Social Security.
The SSA also reports that among households 65 and over, 25% rely on Social Security for 90% of their retirement income or more. This underscores the importance of maximizing benefits, especially given Americans’ broad lack of long-term savings.
💸💰Don’t miss the move: Subscribe to TheStreet’s free daily newsletter💸💰
Americans think it’ll take $1.46 million to achieve a comfortable retirement, according to a 2024 Northwestern Mutual study. Yet the median retirement savings balance among 65- to 74-year-olds was just $200,000 as of 2022, per the Federal Reserve.
Related: Suze Orman issues warning on claiming Social Security early
This tells us there’s a huge savings gap at play, and that Americans may need Social Security more than ever as rampant inflation and sky-high interest rates burden workers and make it next to impossible to save in a meaningful way.
It’s for this reason that Social Security claimants need to be mindful of when they’re taking benefits. And to that end, financial guru Dave Ramsey has some interesting advice.
Getty Images
Dave Ramsey says it’s best to claim Social Security early
Seniors are eligible to claim Social Security once they turn 62. But claimants can’t collect their full retirement benefit until full retirement age arrives. That age is 67 for people born in 1960 or later.
It’s also possible to delay Social Security past full retirement age for boosted benefits.
Related: Dave Ramsey has blunt words on a Social Security, 401(k) problem
Seniors are often warned against claiming Social Security early. And the logic is that given many people’s lack of savings, locking in a reduced monthly benefit for life can be damaging.
But Ramsey isn’t convinced that claiming Social Security early is a bad idea. In fact, he suggests signing up as early as possible.
As he wrote on his blog, “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.”
Ramsey then went on to say, “Taking your benefits early means you’ll receive payments for a longer period of time during retirement. And depending on how long you live, you could end up receiving less money over the course of your retirement from Social Security the longer you wait.”
Seniors in this group can benefit from Ramsey’s Social Security advice
While claiming Social Security ahead of full retirement age can be a risky prospect, so can waiting. So as Ramsey explains, it’s a good idea for filers to calculate their break-even age.
A $2,000 Social Security benefit at a full retirement age of 67 shrinks to $1,400 a month when it’s claimed at age 62. But by roughly age 78 and 1/2, the same amount in total Social Security will have been paid out.
Related: Tony Robbins warns U.S. workers on Social Security, retirement fact
So in this scenario, that’s the break-even age. And people who expect to live beyond 78 and 1/2 may not want to sign up for Social Security at 62.
However, there are people who find themselves in poor health in their early 60s. Claimants in that category should consider taking Ramsey’s advice to file for Social Security at 62, as it could lead to a larger lifetime payout.
More on Dave Ramsey
- Dave Ramsey warns retired Americans to avoid one mortgage mistake
- Finance author has blunt words on Medicare for retirees
- Dave Ramsey candidly discusses buying a home now
Those who don’t like to gamble may want to do the same. The reality, as Ramsey points out, is that any funds collected from Social Security can be invested.
“You can do a much better job investing that money than the government ever could,” Ramsey writes.
So even if benefits are taken early and a longer lifespan follows, there may not be a net loss when we factor in gains on those invested Social Security checks.
Related: Veteran fund manager unveils eye-popping S&P 500 forecast
