Suze Orman said if you do this, you’ll take a “costly cut” to Social Security benefits

• Applying for Social Security at age 62 instead of full retirement age (66-67) results in a 30% reduction in permanent benefits.

• Extending benefits beyond age 62 increases monthly payments but requires living long enough to make up for lost income.

• If you’re thinking about retiring or know someone who is, here are three quick questions that will make many Americans realize they may be retiring sooner than expected. take 5 minutes learn more here

When it comes to claiming Social Security, there are many different opinions out there. Suze Orman, a well-known financial expert, recently shared her thoughts on LinkedIn.

In his post, the financial expert warned that making a specific decision about claiming Social Security could lead to a “costly disruption.”

Here’s what Orman had to say about the Social Security application option, which can result in a huge cost:

Orman’s warning was to apply for SSI at a very young age. You’re allowed to start your benefits at age 62, but Orman doesn’t think you should.

As he explains, the full retirement age (FRA) for most people is between ages 66 and 67, with details depending on the year you were born. If you wait until your FRA for benefits to begin, you may receive the full standard benefit you are eligible to receive from this benefits program. This standard benefit is based on average salaries over the 35 years of your career when your inflation-adjusted income was highest.

But many people start their checks as soon as possible, even though it’s long before the FRA. Orman said doing so would lead to “costly disruption,” and he was right. If you file for benefits before your FRA, you will face early filing penalties. These equal 5/9 of 1% per month for each of the first 36 months and 5/12 of 1% for the prior months for which you claimed benefits.

This adds up, and Orman explained that your benefits could be worth as little as 70% of your standard benefit. This is exactly what would happen if you claimed an FRA of 62 instead of 67, because you would face a 30% reduction in your benefits.

Although Orman warned of the costly disruption that early filing would bring, he did caution against his advice. “Don’t settle for a reduced Social Security benefit. If you’re in good health, the best financial move you can make is not to claim Social Security until you reach your Full Retirement Age (FRA),” he said in the LinkedIn post.

The “good health” part of the statement is important. Because when you delay SSI, you miss out on the income you could have earned. It’s not necessarily bad if you miss those checks because you’ll get larger checks later. But you obviously want to get a large enough check to make up for the income you missed. If you don’t, for example if you die before you reach break-even, then you’ve given up some of your lifetime benefits for no reason.

You should carefully consider your health when deciding about your claim, and also consider things like how your age at the time you make the claim might affect your spouse’s access to survivor benefits or spousal benefits if he or she plans to make the claim. This will help you choose the best age to file a claim.

But the truth is that decision-making can be very confusing, especially for married couples who have many different ways to optimize lifetime benefits. The best option for most people is to work with a financial advisor to get advice on the Social Security claiming age that really makes the most sense, given your individual financial situation.

You may think retirement is all about choosing the best stocks or ETFs, but you’d be wrong. Even large investments can become a liability in retirement. It’s a simple difference between hoarding and giving away, and that makes all the difference.

Good news? After answering three quick questions, many Americans rework their portfolios and find that they can retire earlier than expected. If you are thinking of retiring or know someone who is, take 5 minutes. learn more here.