Data shows Dave Ramsey was wrong about when to claim Social Security

• Dave Ramsey offers advice on claiming Social Security at age 62 and investing.

• Claiming at 62 instead of 70 reduces the benefit by 43% ($1,400 vs. $2,480 in the $2,000 standard benefit).

• If the FRA is 67 the early filing penalty reduces benefits by 30%. Delaying until 70 increases benefits by 24%.

• Have you read the new report shaking up retirement plans? Americans are answering three questions and many are realizing they may retire sooner than expected.

Dave Ramsey is very clear on when to claim Social Security. In both podcasts and on the Ramsey Solutions blog, the financial expert has expressed a consistent preference for a claim age that he believes is correct.

Unfortunately, the data doesn’t back up his recommendations. In fact, it shows that Ramsey is very wrong about the best age to start your Social Security checks. Following Ramsey’s advice on this issue could be a costly mistake, so it’s worth looking at what the research actually shows versus what Ramsey suggests.

Ramsey advised his readers and listeners to claim Social Security at age 62. There were several different justifications for this decision:

• He suggested that you should claim early and, if you don’t need to use the money right away, invest it because the returns you earn from the investment may give you more money than what you would have if you waited to claim benefits and the government extended your check because of the delay.

• He said you should claim benefits early because they stop when you die, so it’s best to grab them while you can.

• He believes that, based on most people’s life expectancy, they are likely to end up with more money if they start receiving checks at 62 instead of delaying.

Since the earliest age you can start making your payments is 62, Ramsey is advising you to decide what results in the maximum early filing penalty. These penalties reduce benefits for each month you claim before your full retirement age. He recommends giving up delayed retirement credits you might have earned by delaying claiming your Social Security benefits beyond your FRA.

The early filing penalty reduces benefits for each month you claim before FRA, resulting in a 30% reduction from your standard benefit if you claim at age 62 and your full retirement age is 67 (if you were born in 1960 or older). It is a critical hit. On the other hand, delayed retirement credits increase benefits for each month of waiting, so delaying until 70 increases your standard benefit by 24%. To understand the impact, look at the numbers. If you were on track for a $2,000 standard benefit, following Ramsey’s advice would mean collecting $1,400 per month instead of the $2,480 you could have accumulated by delaying retirement until 70.