Financial guru Dave Ramsey is causing a stir with his unconventional advice for Social Security beneficiaries — to start receiving their benefits at age 62 and investing all payments.
Ramsey criticizes Social Security as a “mathematical disaster.” Despite the smaller checks received from claiming benefits at age 62, he maintains that through investing in “good mutual funds,” these payments could yield larger benefits than waiting till full retirement age.
However, Social Security payments do increase each year a person opts to delay claiming past age 62. The highest possible payout is reached when beneficiaries begin claiming at age 70.
Ramsey’s advice is met with skepticism by several reputable organizations who argue that not everyone has the ability or willingness to invest.
They state that waiting until age 70 is likely to achieve maximum benefits and caution that the decision on when to claim should be an individual one based on each person’s unique circumstance.
Investing is a complex arena, especially for those lacking financial knowledge. For beneficiaries intrigued by Ramsey’s suggestion, it’s crucial to understand the basics of investing and risk management. Resources detailing mutual funds’ past performances are available online and can be invaluable for making informed investments.
It’s often advisable for individuals to opt for mutual funds known for steady performance, ignoring market fluctuations. Broad market funds or index funds could be good simplified choices, reflecting the performance of the larger stock market. Diversification of one’s portfolio through a balance of stocks, bonds, and cash provides a buffer against market volatility and a stable return over time.
Being conscious of the investment fees is also crucial to maximizing returns and ensuring financial security.
While investing may be achievable and rewarding for some, many beneficiaries heavily rely on their benefits for daily living, lacking the financial room to risk potential mutual fund returns. The investment decision should be based on individual financial comfort and knowledge, not just the allure of potential mutual gains inherent in Ramsey’s proposition.
