"Specifically, Dave Ramsey has said people should take Social Security at 62, which is as early as they are allowed to claim it. He wants people to take the benefits early and invest the money they collect from Social Security to grow their wealth. That's because he believes investing the money could leave you better off than delaying your benefits claim, even though a delay does boost your benefit by allowing you to avoid early filing penalties and earn delayed retirement credits."
"By contrast, an early Social Security claim reduces your benefits by 5/9 of 1% per month for each of the first 36 months you claim benefits ahead of full retirement age, and by 5/12 of 1% for any prior month. This results in a reduction in benefits of 6.7% for each of the first three years of a claim before full retirement age and an additional 5% per year cut for claims made more than 36 months ahead of FRA."
Dave Ramsey advises claiming Social Security at 62 and investing the benefits to earn market returns that could exceed delayed credits. Suze Orman recommends delaying claims to avoid early-filing penalties and maximize delayed retirement credits. Early filing reduces benefits by 5/9 of 1% per month for the first 36 months and by 5/12 of 1% for additional months, yielding about a 6.7% reduction per year for the first three years; delayed claims increase benefits by 2/3 of 1% per month (8% annually). Long-term S&P 500 returns average about 10% but carry volatility and sequence-of-returns risk. Optimal claiming depends on longevity, spousal benefits, taxes, debt, guaranteed income needs, and investment skill.
Read at 24/7 Wall St.
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