What Does Suze Orman Say About Taking Social Security at 62?

Suze Orman, a prominent financial expert and best-selling author, is widely recognized for her direct guidance on personal finance, particularly concerning retirement planning and Social Security. Her perspective is sought by individuals contemplating when to begin receiving Social Security benefits. Orman’s advice aims to empower the public with clear strategies for securing their financial well-being in retirement.

Suze Orman’s Core Stance on Claiming at 62

Suze Orman holds a firm position regarding claiming Social Security benefits at the earliest possible age of 62. She strongly advises against this decision for most individuals, underscoring the potential long-term financial detriment. Orman views claiming benefits at 62 as one of the most significant mistakes a person can make in their retirement planning. Waiting to claim benefits is a more financially sound strategy for a secure retirement.

Her primary message to anyone considering claiming at this age is to seriously reconsider, emphasizing that the immediate gratification of receiving benefits early comes at a substantial and permanent cost. While individuals can begin collecting benefits at age 62, Orman highlights that this choice results in a permanently reduced monthly payout compared to what they would receive at their full retirement age (FRA) or by delaying further. The reduction for claiming at 62 can be as much as 30% of the full benefit amount, a decrease that will apply for the remainder of one’s life. This reduction also impacts subsequent cost-of-living adjustments, as they are based on the already reduced initial benefit amount.

The Rationale Behind Her Advice

Suze Orman’s advice against early claiming stems from several financial and longevity-related factors. A primary reason is the significant and permanent reduction in monthly benefits. For instance, if an individual’s full retirement age benefit is $2,000 per month, claiming at 62 could reduce that payment to $1,400 per month, a $600 difference that persists for life. This diminished monthly income can substantially impact a retiree’s purchasing power over decades.

The financial implications extend beyond the individual’s own benefit to spousal and survivor benefits. Claiming one’s own Social Security benefit early can reduce the amount a surviving spouse might receive in survivor benefits. While claiming early does not directly affect a spouse’s own retirement benefit based on their work record, it can lower the survivor benefit that a spouse would be entitled to if the higher-earning individual passes away. Survivor benefits are generally based on the deceased worker’s benefit amount, meaning a reduced benefit for the deceased translates to a reduced benefit for the survivor.

Orman also emphasizes the importance of life expectancy. Many individuals are living longer, and a longer retirement necessitates a higher, guaranteed income stream. Delaying benefits allows for significant increases, with an 8% annual increase in benefits for each year delayed past full retirement age, up to age 70. This translates to a benefit that can be 76% higher at age 70 compared to claiming at age 62. Orman points out that for those who live to an average life expectancy or beyond, the cumulative lifetime benefits from delaying can far outweigh the initial payments received by claiming early.

Situations Where Early Claiming Might Be Considered

While Suze Orman generally advises against claiming Social Security at age 62, she acknowledges there are specific, often dire, circumstances where it might be a necessary or unavoidable option. One such scenario is severe health issues that indicate a significantly shortened life expectancy. In cases where an individual may not live long enough to benefit from delayed retirement credits, claiming early could make sense to maximize total lifetime benefits.

Extreme financial hardship also presents a situation where early claiming might be considered. If an individual has no other sources of income, faces an inability to work, and cannot cover basic living expenses, accessing Social Security benefits at 62 may be the only viable path to avoid destitution. Orman suggests that if income is genuinely needed to survive, then claiming early becomes a practical reality. However, she stresses that these are exceptions, not general recommendations, and should be carefully evaluated.

Maximizing Social Security Benefits: Orman’s Broader Strategies

Beyond the decision to claim at age 62, Suze Orman advocates for broader strategies aimed at maximizing Social Security benefits as part of a comprehensive retirement plan. A central tenet of her advice is delaying benefits to earn delayed retirement credits. This strategy can lead to a substantially higher monthly payment for the remainder of their life.

Orman also highlights the importance of understanding break-even points, which is the age at which the cumulative higher payments from delaying benefits surpass the total received by claiming earlier. While actuarial tables suggest that benefits are designed to be roughly equivalent over an average lifespan regardless of when claimed, delaying provides a hedge against outliving other assets, especially for those who live longer than average. This means that for healthy individuals, delaying benefits provides a greater total payout over their lifetime.

For married couples, Orman advises strategic coordination of benefits. She frequently recommends that the higher-earning spouse delay claiming Social Security until age 70. This approach aims to maximize the potential survivor benefit for the remaining spouse, as the survivor is generally entitled to the higher of their own benefit or the deceased spouse’s benefit. By maximizing the higher earner’s benefit, the surviving spouse is better protected financially. Orman consistently emphasizes that Social Security should not be viewed as the sole source of retirement income but rather as one component integrated with personal savings, investments, and other income streams to ensure a secure financial future.