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Dave Ramsey wants Baby Boomers to make an unconventional move when it comes to Social Security. He wants retirees to claim benefits at 62 and invest the money. This is a sharp departure from standard advice on claiming Social Security as late as possible in order to maximize the monthly income that you receive in retirement.
While there are some potential risks to this approach, it can also have a lot of merit and is worth considering as long as you are confident that you can invest the money wisely and give it the very best chance to grow.
Why you should consider starting Social Security at 62 and investing the money
Ramsey recommends that retirees begin claiming Social Security at the earliest age when their benefits become available, despite the fact that this age is well before their full retirement age (FRA), and despite the fact that a claim before FRA shrinks the monthly checks you get. If you start benefits at 62 rather than waiting until your FRA, then you are hit with early filing penalties.
Anyone born in 1960 or later has an FRA of 67, so a claim at 62 would be five years ahead of schedule. As a result, it would result in a 30% cut to benefits.
However, Ramsey isn’t worried about that when he suggested starting payments early because of the fact that he wants you to invest the money. If you put the funds into a high-performing mutual fund, then Ramsey believes you can end up earning more than the added bump in your Social Security benefits that would come from delaying your claim.
Ramsey’s argument has some merit
Ramsey’s argument definitely has some merit. If you make an early claim for benefits, you shrink your checks by 5/9 of 1% for each of the first 36 months and by 5/12 of 1% for each month before that time. The result is about a 6.7% reduction in Social Security for each of the first three years compared with your standard benefit, as well as a 5% reduction for each year before that.
While these reductions do mean your benefits take a hit, investing the money gives you the chance to earn a potentially better ROI than the one resulting from a delayed claim.
Ramsey believes you can earn a 12% average annual return from a mutual fund. However, that is a bit optimistic and perhaps even unrealistic for retirees who have to maintain a somewhat conservative retirement portfolio due to their short timeline until they need the funds. Still, while he may be overly optimistic, it’s far from unreasonable to suggest you could earn an average 10% annual return given the S&P has historically provided this ROI when investing for the long-term.
Taking Social Security and investing the funds yourself also puts your future retirement success in your hands, rather than just sitting back, relying on the government to provide you with the money you need. You can turn that Social Security into a larger pot of funds that you can use to fund your retirement or to provide for loved ones after you are gone.
Should you claim Social Security at 62 and invest the money?
If you are confident you can invest, then it may be worth trying Ramsey’s advice. However, there is a bit of a catch. If you start benefits at 62 and you plan to keep working, you could reduce the monthly income Social Security provides to you if you earn too much money from your job.
You’ll lose $1 in benefits for every $2 earned above a set threshold ($23,400 per year or $1,950 per month as of 2025). You eventually get it back because benefits are recalculated at FRA to make up for missed pay. However, in the meantime, you can’t double-dip and get both a big paycheck and benefits.
That means if you want to claim early and invest your benefits as Ramsey suggests, you’re likely going to need a good amount in savings already to live off while you collect your Social Security income and sock it away for the future. You’ll want to make sure you have this money available as a support source before you file for Social Security and then realize you can’t invest the money because you need it to live on instead.
A financial advisor can help you to determine both if you can afford to follow Ramsey’s plan and if it’s the right one for you, so it’s worth getting this professional advice before you move forward with a benefits claim.