Financial guru Dave Ramsey has always stirred discussion with his unconventional take on Social Security. While most experts recommend waiting until full retirement age to claim benefits, Ramsey believes retirees should claim Social Security as early as 62.
Here are 12 important pros and cons of starting social security payments early.
Lets get started with benefits:
Can Alleviate Financial Strain
Beginning Social Security benefits at age 62 can be a lifeline for retirees who are facing money problems and don’t have sufficient savings. Many baby Boomers face challenges covering their everyday expenses.
Around 43% of Baby Boomers have no retirement savings and a median savings of just $202,000. Early Social Security payments, which average around $1,298 per month, can help retirees with financial support to maintain their lifestyle.
Practical Choice For Some
For people with health concerns that could reduce their life expectancy, taking Social Security benefits at 62 might be a practical choice. This ensures they receive payments they might miss if they wait too long. Early access to these benefits provides financial stability and peace of mind.
On the other hand, if you’re married and your Social Security payments are significantly higher than your spouse’s, delaying your claim could result in a larger survivor benefit for them. You must consult a financial expert to help you make the best decision.
Perfect For Retirement From Challenging Jobs
If your job is tough (physically or mentally) and you’re ready to stop working, claiming Social Security at 62 might be a wise choice, especially if you have other savings. If you continue working and earn more than $22,320 a year, Social Security will reduce your benefits by withholding $1 for every $2 you earn over that limit.
So, taking benefits early could be a good option if you don’t want to work anymore and have enough savings for your retirement.
Financial Flexibility For Active Retirement
Starting Social Security benefits at 62 offers you the financial freedom to do things you love while you still have the energy. It allows you to pursue hobbies, travel, and spend time with your loved ones during your most energetic years.
While the monthly payments might be smaller, starting them early lets you make the most of your retirement without missing out on months of payments. This option can help you cover expenses without relying heavily on your savings to maintain your lifestyle.
When Facing a Financial Emergency
If you’ve been laid off or are facing a financial emergency, drawing Social Security benefits at 62 can offer much-needed stability. These funds can help retirees navigate tough times by covering essential costs like housing, bills, and groceries.
For people without pensions or steady income, early access to benefits ensures a smoother transition into retirement. It reduces financial stress and helps retirees focus on their new lifestyle. By guaranteeing financial support during challenging circumstances, this fund can help you start fresh and plan your next steps in life.
Investing For Long Term Gains
Beginning Social Security payments at 62 provides the opportunity to invest the money and grow wealth over time. Placing early benefits into investments like mutual funds tied to the S&P 500 could yield significant returns, as the index has historically averaged strong growth rates.
Having access to extra cash provides flexibility for unexpected expenses or market opportunities. However, investing involves risks, so plan carefully and consider your financial situation before investing.
Here are some of the downsides:
Lower Monthly Payments
Taking Social Security at 62 means accepting reduced monthly payments—up to 30% less than you’d receive by waiting until full retirement age or beyond.
If you’re still working or have alternative income sources like investments, pensions, or annuities, it may make sense to delay claiming benefits to secure higher payouts. Deciding when to claim Social Security should align with your financial needs and long-term goals.
Earnings Test Reduces Benefits
If you claim Social Security before reaching your full retirement age and continue working, you might lose some benefits due to the earnings test. In 2025, if you’re below your FRA all year, the government will take $1 from your benefits for every $2 you earn over $23,400.
If you reach your FRA in 2025, they will take one dollar for every three you earn over $62,160 before your birthday. For higher earners, this could mean losing all their Social Security benefits due to the deductions.
Consider Longevity
Living a long life can impact your Social Security benefits if you claim them early. While you receive more payments upfront, you might end up with less money overall if you live beyond your break-even point, usually around age 78.5.
This could lead to financial problems in your 80s or 90s, especially if you have fewer income sources. If you expect to live a long life due to good health or a strong family history, postponing benefits can help secure greater financial stability in the years ahead.
Lower Survivor Benefits
Starting Social Security at 62 could mean smaller survivor benefits for your family after you’re gone. The amount they receive depends on their relationship to you and how much you were getting.
Understanding this and discussing it with your loved one is essential before you decide when to begin your benefits.
Investment Risks
Some retirees choose to invest their early Social Security benefits, but successful investing requires knowledge, patience, and risk management, which can be challenging for beginners. Poor investments could lead to financial loss and reduce monthly payments from claiming benefits early.
To plan effectively, use Social Security calculators and seek guidance from financial experts to create a retirement strategy that fits your long-term needs.
Increasing Healthcare Costs
Receiving Social Security from age 62 may leave you with smaller monthly benefits, which can be a problem as healthcare costs increase with age. The average retiree can anticipate spending about $315,000 on healthcare throughout their retirement years, covering everything from insurance premiums to long-term care.
Smaller monthly benefits might force you to dip into your savings for your medical expenses. Plan and consider your future medical expenses before taking benefits early.
