Financial guru Dave Ramsey isn’t shy about his dislike for Social Security. He’s called it a “stupid thing” and a “mathematical disaster,” criticizing the program’s long-term viability. So, it’s no surprise that Ramsey’s advice on claiming Social Security benefits differs wildly from conventional wisdom.
Ramsey advocates for claiming benefits as early as age 62, even though most financial experts advise against it. His rationale? Invest every penny of your checks. By doing so, Ramsey claims you’ll earn a greater return than waiting until a later age, which would net you a larger monthly check.
While the traditional approach encourages waiting to maximize your monthly check, Ramsey proposes a different strategy. He believes investing your early, smaller checks can actually outperform the bigger payments received later.
In a 2019 podcast, Ramsey responded to a listener’s question about the optimal age to claim Social Security. He emphasized that taking benefits early can be beneficial, but only under one condition: consistent investment in a “good mutual fund.”
Ramsey’s logic hinges on the potential for market growth outpacing the increased monthly benefit. He claims a well-chosen mutual fund can easily cover the gap between a smaller early check and a larger delayed one.
However, questions remain about the feasibility of Ramsey’s approach. He provides no specific recommendations for identifying “good mutual funds,” leaving many retirees unsure where to turn for investment advice.
Further complicating matters, the average mutual fund performance lags behind the S&P 500 index. This raises concerns about whether Ramsey’s strategy can consistently deliver the promised results.
Additionally, Ramsey overlooks the reality for many Social Security recipients. Many rely on their checks for everyday expenses, making the luxury of long-term investing a distant dream.
While Ramsey’s approach offers an intriguing alternative to traditional methods, it’s crucial to carefully consider its implications. Not everyone possesses the financial resources or expertise to navigate the complexities of investing.
Ultimately, the decision of when to claim Social Security remains a personal one. Weighing Ramsey’s advice alongside traditional wisdom and your individual circumstances is essential for making an informed choice about your financial future.