Suze Orman: Early Social Security Claiming Is Costly Mistake

At the heart of Suze Orman’s warning is a simple but powerful arithmetic reality. While individuals become eligible for Social Security benefits at age 62, claiming at this point triggers what are known as early filing penalties. Full retirement age (FRA)—the point at which you receive 100% of your standard benefit—is between 66 and 67 for most people, depending on their birth year. Orman explains that claiming benefits any month before this FRA results in a permanent reduction. The penalties are calculated as 5/9 of 1% for each of the first 36 months before FRA, and 5/12 of 1% for each additional month.

This reduction is not trivial. As Orman pointed out, for someone whose FRA is 67, claiming at 62 results in a steep 30% cut to their monthly benefit. This means they would receive only 70% of their standard benefit for the rest of their life. For a retiree expecting a $2,000 monthly benefit at FRA, claiming at 62 would lock them into just $1,400 per month—a difference of $7,200 annually. This “costly cut,” as Orman describes it, can have a profound and lasting impact on a retiree’s financial security and quality of life.

However, Suze Orman’s advice is not a one-size-fits-all mandate. She includes a critical caveat that tempers her strong warning against early claiming: “If you are in good health, the best financial move you can make is to not claim Social Security before you reach your Full Retirement Age.” This distinction is paramount because the decision to delay benefits is essentially a bet on longevity. By waiting, you forgo several years of income in exchange for higher monthly payments later.

The break-even point—the age at which the total benefits received from waiting surpass the total benefits received from claiming early—is a key consideration. If an individual is in poor health or has a shorter life expectancy, claiming early might result in receiving more money over their lifetime, despite the smaller monthly checks. Conversely, for those in excellent health with a family history of longevity, delaying claims, potentially even beyond FRA up to age 70 when benefits max out, can significantly increase lifetime Social Security income. This nuanced reality moves the decision beyond simple math and into the realm of personal health assessment.

The calculus becomes exponentially more complicated for married couples, a point underscored by the complexity that leads many to seek help from services like SmartAsset. A claiming decision is never made in a vacuum; it directly impacts a spouse’s financial future. For instance, when one spouse dies, the surviving spouse is eligible to receive the higher of their own benefit or their deceased spouse’s benefit. If the primary earner claims early and accepts a permanently reduced benefit, they also permanently reduce the potential survivor benefit for their partner.

Furthermore, spousal benefits allow a lower-earning spouse to receive up to 50% of the higher-earning spouse’s benefit at their full retirement age. An early claim by the primary earner reduces this spousal benefit as well. This interconnectedness means couples must coordinate their claiming strategies to optimize their combined lifetime benefits. The multitude of variables—individual earnings records, age differences, and health statuses—creates a labyrinth of choices that can be overwhelming to navigate without professional guidance.

Given the high stakes and intricate variables, Suze Orman’s underlying message, echoed by 24/7 Wall St., is the value of personalized advice. The article suggests that for most people, “the best option is to work with a financial advisor.” A qualified advisor can help model different scenarios based on an individual’s or couple’s specific financial situation, health, and goals. They can calculate break-even points and analyze how a claiming age interacts with other retirement income sources, such as pensions, savings, and investments.

Ultimately, Suze Orman’s warning serves as a crucial wake-up call. Claiming Social Security is one of the most significant financial decisions of a lifetime, with consequences that are largely irreversible. While the temptation to claim early is understandable, especially for those eager to retire or facing financial pressure, Orman’s analysis highlights the long-term price of that immediate gratification. The path forward requires careful, individualized planning to ensure that this foundational pillar of retirement income provides the security it was designed to offer.