©Dave Ramsey

©Dave Ramsey

It’s safe to say that financial guru Dave Ramsey is not a fan of Social Security, as he called the program a “stupid thing” and a “mathematical disaster” that “robbed” him of his money for decades. It should come as no surprise, then, that Ramsey goes against conventional wisdom when it comes to the age at which Social Security benefits should be claimed.

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Ramsey says it’s okay to collect benefits starting at age 62 (something most financial experts advise against) if you take your checks and invest them. He claims that doing so will give him a higher return than he would get if he waited until later in life to claim Social Security, which means he’ll get a larger monthly check.

“It usually makes sense to do it early if you’re going to… invest everything,” Ramsey said in a 2019 podcast that aired on YouTube.

Ramsey was responding to a listener’s question about whether it made more sense to collect Social Security at age 62 or wait until full retirement age, which is 66 or 67, depending on the year you were born.

The way Social Security is set up, the longer you wait to collect retirement benefits, the higher your monthly payment will be. Claiming benefits at age 62 means you’ll receive the smallest check possible. Your check increases each year after the 62 years you wait to collect.

When you reach full retirement age, you get all benefits due based on the Social Security payroll taxes you contributed while working. The highest payout occurs when you apply at age 70, after which there is no longer any financial advantage to waiting.

Waiting until you’re 70 to claim Social Security could increase your finances by more than $182,000, according to a recent study by David Altig of the Federal Reserve Bank of Atlanta, Laurence Kotlikoff of Boston University, and Victor Yifan Ye, a scientist. investigator. in Opendoor Technologies.

On the other hand, if you decide to collect as soon as you turn 62, you will receive a significantly reduced benefit (by 30%) for the rest of your life instead of waiting until full retirement age.

But according to Ramsey, you can more than make up for those shortfalls by claiming Social Security at age 62 and then putting all your checks into a “good mutual fund.”

“That account will make you more than enough to cover the difference between your 66 (age) account and your 62 (age) account,” Ramsey said on the podcast before ranting about Social Security being a “broken system.” system” and a “disaster.”

He did not say what constitutes a “good mutual fund” or offer suggestions on how to find one. There isn’t much information that tracks the average performance of mutual funds over time, mainly because there are so many different types of funds and their performances are all over the map.

A 2020 blog on the site Credit Donkey reported that investors earned an average of 4.67% on mutual funds over the previous 20 years. That was well below the performance of the S&P 500 index over the same time period. Over the past 30 years, the S&P 500 Index has returned a compounded average annual growth rate of 10.7% per year, The Motley Fool recently reported.

But finding a “good” mutual fund can be difficult for Social Security recipients who aren’t financially savvy and can’t afford to buy one.

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Another thing Ramsey didn’t address was the fact that many Social Security recipients rely on their checks to help pay the bills, and don’t have the financial means to put them into a mutual fund in the hopes that the fund will provide them with a good return. return years later.

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This article originally appeared on GOBankingRates.com: Dave Ramsey Says To Take Social Security At Age 62, But Only If You Do This With Every Check

By Sam