Financial guru Dave Ramsey called Social Security “stupid” and a “mathematical disaster” that “robbed” people of their money for decades. , it’s safe to say I’m not a fan of Social Security. So it’s no surprise that Ramsey goes against conventional wisdom when it comes to the age at which you should claim Social Security benefits.
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Ramsey says it’s OK to take benefits as early as age 62 if you take the check and invest it, something most financial experts don’t recommend. By doing so, he argues, you’ll get a bigger benefit than if you wait until you’re older to apply for Social Security, meaning you’ll receive a larger monthly check.
“If you’re going to invest everything, it usually makes sense to go early,” Ramsey said in a 2019 podcast aired on YouTube.
Ramsey was responding to a question from a listener about whether it makes more sense to collect Social Security at age 62 or to wait until full retirement age, which is 66 or 67, depending on your year of birth.
Because of the way Social Security works, the later you wait to receive your retirement benefits, the higher your monthly payments will be. If you claim benefits at age 62, you’ll receive a minimal check. The amount of the check increases each time he reaches the age of 62.
When you reach full retirement age, you receive your full benefit based on the Social Security payroll taxes you contributed during your employment. The maximum payout occurs when you apply at age 70, but there is no financial benefit to waiting after that.
A recent study conducted by David Altig of the Federal Reserve Bank of Atlanta, Lawrence Kotlikoff of Boston University, and research scientist Victor Yifan Ye found that if you wait until age 70 to claim Social Security benefits, , household budgets could increase by more than $182,000. At Opendoor Technologies.
On the other hand, if you decide to take them as soon as you turn 62, you’ll receive significantly less benefits (30% less) for the rest of your life than if you wait until your full retirement age.
But Ramsey says you can more than make up for the shortfall by filing for Social Security at age 62 and putting all your checks in “a good mutual fund.”
“That one account will give you more than enough money to cover the difference with your money.” [age] 66 Accounts and your [age] 62 accounts,” Ramsey said on the podcast, before launching into a mini-rant about Social Security being a “broken system” and a “disaster.”
He didn’t say what a “good mutual fund” is or suggest how to find one. There isn’t a lot of information tracking the average performance of mutual funds over time. The main reason is that there are so many types of funds and their performance spans a wide range.
A 2020 blog on the Credit Donkey site reports that investors have earned an average return of 4.67% on mutual funds over the past 20 years. This was significantly below the performance of the S&P 500 index over the same period. Over the past 30 years, the S&P 500 index has achieved an average annual growth rate of 10.7%, The Motley Fool recently reported.
But for Social Security recipients who aren’t financial experts and can’t afford mutual funds, finding a “good” mutual fund can be difficult.
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Another point Ramsey didn’t mention is that many Social Security recipients rely on checks to pay their bills, and they lack the financial wherewithal to put money into mutual funds in the hopes that the fund will provide them. The fact is that there is no. You can expect good returns in a few years.
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This article originally appeared on GOBankingRates.com: Dave Ramsey says you should start collecting Social Security when you turn 62, but only if you do it check by check.