Dave Ramsey’s Social Security Advice Comes With a Catch Many Retirees Can’t Afford

Claiming Social Security at 62 may sound like an easy win. You start collecting sooner, invest the money, and let time do the heavy lifting. That's the thinking behind Dave Ramsey's long-standing advice.

It works well for some retirees, but it's much harder to pull off if you're living on just Social Security. Here's the assumption behind Ramsey's advice and why it could make such a big difference to your retirement.

What Ramsey actually recommends

Ramsey believes you should claim Social Security at 62 and invest every check rather than wait for a larger monthly benefit.

He argues that stock market growth could produce a better return than the increase Social Security gives you for delaying. "You can do a much better job investing that money than the government ever could," he wrote on the Ramsey Solutions blog.

His second argument is about mortality. "Your retirement payments die when you die," he wrote, "so you might as well take the money and make the most of it while you can." In his view, collecting smaller checks for more years and investing them beats waiting for larger checks you might not live long enough to enjoy.

What claiming at 62 does to your check

Claiming at 62 permanently reduces your monthly benefit. If your full retirement benefit is $2,000 a month at age 67, claiming at 62 drops it to about $1,400. Waiting until 70 lifts it to roughly $2,480. Delaying raises your benefit by about 8% a year through age 70, adjusted for inflation and guaranteed regardless of what the market does.

For most retirees, waiting produces more lifetime income once they reach about age 80. Today's average 65-year-old is expected to live into their mid-80s, according to the SSA, which means many retirees would collect more overall by waiting than by claiming as soon as they're eligible.

What that gap costs over a full retirement

The difference between $1,400 a month at 62 and $2,000 a month at 67 is $600 every month, or $7,200 a year. Over 20 years of retirement, that adds up to $144,000 in income.

Ramsey's strategy could still come out ahead, but only if investing those early checks earns enough to replace the income you gave up by claiming early. The longer you live, the more ground those investments need to make up.

What the strategy requires

Ramsey's approach works only when you can direct every Social Security payment into the market and leave it there. That means having enough other income to cover your expenses without touching those checks. For roughly 40% of older Americans who depend on Social Security for most of their income, that condition isn't available.

It also depends on leaving the money invested through market ups and downs. Selling after a market drop to cover living expenses could lock in losses and make it much harder to catch up later.

The strategy also asks you to trade a guaranteed increase in your Social Security benefit for the chance of earning more in the market. Delaying your claim raises your benefit by about 8% a year through age 70, adjusted for inflation. Ramsey believes long-term market returns could do better, but that outcome depends on how your investments perform over time.

The spousal risk many couples overlook

If you are the higher earner, your claiming decision could affect your spouse long after you're gone. When one spouse dies, the surviving spouse keeps the larger Social Security check and loses the smaller one.

Claiming at 62 permanently reduces that larger benefit, which could leave your surviving spouse with less income for years. Ramsey's strategy assumes the investment returns make up for that tradeoff, but that outcome depends on the market and may not happen.

When claiming at 62 may make sense

Claiming Social Security at 62 could be the right move if poor health or a shorter life expectancy means you're less likely to benefit from waiting for a larger check.

It could also be the practical choice if you need the income to cover your monthly expenses. Waiting isn't always an option when those checks are paying the bills.

Ramsey's approach fits a different situation. If you have enough savings to cover your expenses and invest every Social Security payment for years, you're much closer to the circumstances his advice is designed for.

Bottom line

Ramsey's strategy could work when you have enough income or savings to invest every Social Security check and leave the money in the market through downturns.

Many retirees need those checks to cover everyday expenses, which makes waiting for a larger guaranteed benefit the safer fit. Your retirement plan should be built around the income you could count on and the level of risk you are comfortable taking.

The closer your strategy matches your real financial situation, the more likely it is to support you throughout retirement.

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