Suze Orman: Why Early Social Security Claims Could Ruin Your Retirement

In the realm of personal finance, few names carry as much weight as Suze Orman. Known for her straightforward and often blunt advice, Orman has long been a champion for financial prudence, especially when it comes to retirement planning. One of her most emphatic pieces of advice is to avoid claiming Social Security benefits early. According to Orman, doing so could sabotage your financial future, particularly for those who lack substantial retirement savings.



The allure of early Social Security benefits is understandable. For many, the earliest age to claim benefits is 62, and the temptation to start receiving that monthly check can be strong, especially for those who have not saved enough for retirement. However, Orman warns that this decision can have long-lasting and detrimental effects on your financial stability.

Orman's advice is rooted in the understanding that the benefits you receive at age 62 will be permanently lower than if you wait. "Every month past age 62 you don't claim your benefit entitles you to a slightly larger payout when you do start collecting your benefit," she explains. "Over time, those small incremental increases add up." This means that waiting until your full retirement age (which is 67 for those born in 1960 or later) or even until age 70 can result in significantly higher monthly benefits.

The financial implications of this decision are substantial. If you wait until age 70 to claim your benefits, your payout will be 76% higher than if you had started at age 62. This is a massive difference that can provide a much-needed financial cushion in your later years. For those who rely heavily on Social Security, this increased benefit can be the difference between financial security and constant worry.

Orman's advice is particularly relevant for women, who statistically have a longer lifespan than men. "A woman who makes it to age 65 in average health has a 50% probability of still being alive at age 88," she notes. This longevity factor makes delaying benefits even more advantageous, as it ensures a higher monthly payout for a longer period.

However, the decision to delay benefits is not without its risks. For those who are in poor health or have a shorter life expectancy, claiming benefits early might make more sense. Additionally, if you are still working and claim benefits before your full retirement age, you may face penalties that reduce your benefits further.

Orman also emphasizes the importance of considering your overall financial situation. For those with limited retirement savings, Social Security can serve as a crucial lifeline. However, relying solely on Social Security is risky, as it will only replace about 40% of your pre-retirement wages. This means that retiring on Social Security benefits alone results in a 60% pay cut, which is often not sustainable.

In conclusion, Suze Orman's advice to delay claiming Social Security benefits until age 70 is a prudent strategy for those looking to secure their financial future. While there are risks and considerations to take into account, the potential benefits of higher monthly payouts and long-term financial stability make a strong case for waiting. For those who rely heavily on Social Security, this decision could be the key to a more secure and comfortable retirement.