After the trustees of the Social Security and Medicare announced that the funds would be deplete by the year 2035, thousands panicked, believing that they will not even enjoy the minimum retirement benefits when they reach the corresponding age.
According to the trustees, there is a risk that, starting from the year 2035, only 83% of benefits will be able to be paid, unless the government makes some changes in policy, either from the Federal Government or from the Senate or the House of Representatives.
As the Social Security Administration (SSA) explains, the taxes paid to Social Security today go to send the checks to people who are already retired, those with qualifying disabilities, survivors of beneficiary workers who have died, and dependents of beneficiaries.In other words, the Social Security taxes that you pay today do not go to a personal account for taxpayers to receive during their retirement. In simple terms, the money you pay today is not your money. It goes into the SSA coffers to maintain the benefits that are paid today.
Dave Ramsay on Panicking Over Social Security Depletion: “Claim Your Benefits Now”
In the midst of the financial fear generated by all these rumors and all these alerts, financial guru Dave Ramsey recommended that Americans should claim benefits in advance. Of course, this generated a gigantic debate on the internet and among other financial experts who urge to wait as long as possible to get a much larger retirement check.
According to Ramsey, the best strategy for most Americans is to start claiming their Social Security benefits as soon as they turn 62. According to him, this approach will allow people to access their money earlier, allowing them to invest it in mutual funds for potentially higher returns or other investments such as real estate, for example.
This economist claims that Americans can agree to receive lower monthly payments, which happens when you claim your Social Security benefits at age 62 instead of 70, because they access that money earlier and can capitalize on their investments privately.
Learn More: Why Dave Ramsey Advises Halting 401(k) Contributions While You’re in Debt
More Critic for the Social Security System: Is It “Broken?”
But Ramsey did not stop there and raised the bar of criticism and controversy: He assured that the Social Security system is fundamentally flawed and unreliable, and described it as a “broken system” and a “disaster”. Wow, Ramsey didn’t keep anything to himself, huh!
But wait, because there’s even more: Ramsey added as a personal tip that people not rely on Social Security benefits as their main source of retirement income. Well, that’s not something new that Ramsey invented, but by definition, Social Security is not designed to cover the entire expenses of a retired person or a person who receives another benefit such as SSI or SSDI.
For him, all this uncertainty that is going to be floating around the room like a gigantic white elephant makes it prudent to take the money as soon as possible and make it work privately in investments that he calls “smart”.
Experts Recommend Doing This With Social Security, and It’s Now What Ramsay Says
Before continuing, we must emphasize, as always, that we are not giving professional advice, but we are only informing what Ramsey and other professionals in the financial and retirement area recommend. Remember that the final decision will always be yours and no one else’s, and that the most responsible thing on your part is to get advice from experts in retirement or stock market investments.
Returning to what the experts recommend, because it is contrary to what Ramsey says: most say that it is worth waiting until the age of 70 or at least 66 or 67, which is the “full retirement age” (FRA), depending on the year in which you are born.
According to the SSA, if you delay benefits until age 70, you will receive up to 132% of the benefit you would have received if you retired at 62, as Ramsey recommends.
Experts opposed to Ramsey say that those who are in good health and have a long life expectancy should wait as long as possible and, in the meantime, continue making contributions to Social Security to reach that much-dreamed-of 132%.
Investing Is for Those With the Know-How
Only, as the financial expert said, it should also be noted that you have to have financial and investment management knowledge to be able to benefit from an early retirement application and manage that money so that it becomes another bigger pile of money.
As long as Social Security continues to face uncertainties and doubts, anyway, don’t panic or get carried away by internet virals: carefully weigh all your options so that you can orient yourself to make the best possible decision that will give you the greatest benefits in your situation.