Personal finance expert Suze Orman has issued a stern warning to Americans regarding their retirement strategies, specifically targeting the common tendency to claim Social Security benefits as soon as they become available. While the age of 62 marks the earliest point at which many can access their earned benefits, Orman argues that this decision often results in a significant and permanent reduction in monthly income that can haunt retirees in their later years.
The math behind Social Security is designed to be actuarially neutral, but it heavily rewards those who have the patience and resources to wait. For every year an individual delays claiming past their full retirement age, their benefit increases by approximately 8 percent. Orman emphasizes that this guaranteed return is virtually impossible to match through traditional market investments without taking on substantial risk. By claiming at 62, individuals are essentially accepting a locked-in discount on their lifetime purchasing power.
One of the primary drivers behind early filing is the fear that the Social Security Trust Fund will be depleted. However, Orman suggests that this fear is often misplaced. Even if the reserves are exhausted, the system is projected to continue paying out a significant portion of benefits through ongoing payroll taxes. Making a permanent financial decision based on political uncertainty can lead to a standard of living in one’s 80s and 90s that is far lower than necessary. Longevity risk, the danger of outliving one’s money, is a much more credible threat to the average American than the total collapse of the federal retirement system.
Financial planners often look at the break-even point to determine when a later filing starts to pay off. For most, that point occurs in their late 70s or early 80s. With modern medicine extending life expectancies, a significant portion of the population will live well past that threshold. Orman points out that Social Security is the only source of inflation-adjusted income that most people will ever have. Maximizing that base provides a critical safety net against the rising costs of healthcare and long-term care that inevitably arise as people age.
Furthermore, Orman discusses the impact on surviving spouses. When the higher-earning member of a couple claims early, they are not just reducing their own check; they are potentially limiting the survivor benefit available to their partner. This can leave a widow or widower in a precarious position during a time when they are most vulnerable. Planning for Social Security should never be viewed as an individual choice, but rather as a comprehensive household strategy intended to provide the highest possible floor for the longest-living spouse.
For those who feel they must retire early due to health issues or job loss, Orman suggests tapping into other assets first. Using a 401(k) or IRA to bridge the gap between age 62 and 70 can often be a superior strategy compared to taking Social Security early. While it feels counterintuitive to spend down savings while leaving a government check on the table, the long-term boost to the monthly Social Security payment creates a far more stable financial foundation for the final decades of life.
Ultimately, the message is one of discipline and long-term vision. Orman urges workers to view Social Security as an insurance policy against old age rather than a windfall to be accessed at the first opportunity. By reframing the benefit as a reward for longevity, Americans can better protect themselves against the economic uncertainties of the future.
