This Could Be Dave Ramsey’s Worst Piece of Social Security Advice

Dave Ramsey’s advice can be problematic sometimes, and that’s especially true when it comes to his suggestion for when to claim Social Security. 

The reality is that if you listen to the finance guru’s advice, you could leave an average of $182,370 on the table.  Here’s why you don’t want to follow his suggestion and why the advice is so bad.

Dave Ramsey has some very bad Social Security advice

Dave Ramsey provided some advice in a 2019 podcast when a caller asked for opinions on when to claim Social Security benefits. Ramsey advised claiming at 62, which is the earliest possible age when the benefits become claimable. 

Claiming Social Security at 62 will significantly reduce Social Security benefits because there is a system of early-filing penalties in place. Retirees get their standard benefit at a designated age called their Full Retirement Age (FRA), which is 67 for anyone born in 1960 or after.  A claim at 62 could be five full years before FRA, which would mean that anyone who claims at that time faces a 30% reduction in their standard benefit amount. 

Ramsey still believes that claiming Social Security at 62 is best, despite taking that hit, because he thinks that people can do better by investing the money that they claim from Social Security instead of just leaving their benefits to grow. Of course, this advice is fairly impractical. 

Here’s what’s wrong with Ramsey’s advice

There are a lot of problems with Ramsey’s suggestion.

For one thing, you can’t just take every dollar of your Social Security and invest it in most cases, unless you have enough money to live on without a single dime of benefits. And you can’t really get much of that money from work because there are work limits when you are collecting Social Security and earning a paycheck at the same time, if you are before your full retirement age. 

In 2025, if you are before your FRA all year and you work and earn more than $23,400, you lose $1 in benefits for every $2 earned above that amount. Most people don’t want to live on $23,400 or less. So, you’ll have to limit how much income you get from a job if you’re following Ramsey’s plan and collecting Social Security to invest it.

Your other alternative is to get money from savings while investing your Social Security, but supporting yourself entirely on your savings doesn’t seem like a viable plan for most people. 

The biggest issue, though, is that research has repeatedly shown that claiming Social Security at 70 is the best age — not 62. In fact,  the National Bureau of Economic Research found that more than 90% of people do better when they wait until 70, and those who claim at an earlier “sub-optimal” time will end up losing out on $182,370 in lifetime discretionary spending. 

Claiming Social Security at 62 means you are likely going to be one of those people who lose out on this wealth — and you are unlikely to end up making up for it by investing the money. You’re risking a lot of potential future income in hopes that you’ll both be responsible enough to invest and that your investments will end up performing very well, even as you need to build a conservative portfolio given how close you are to retirement. 

You should most likely not listen to Ramsey as a result of these issues and should instead work with a financial advisor who can help you to make a fully informed choice about when claiming benefits actually makes sense for your situation.