Suze Orman issues warning on common Social Security mistake

25 Mar 2025, 12:07 by Maurie Backman · The Fresno Bee

Because many older Americans kick off retirement with minimal savings, many end up fairly reliant on Social Security to make ends meet. A good 91% of retirees today depend on Social Security for income, according to the Employee Benefit Research Institute, while 88% of workers expect Social Security to get them through their senior years.

Yet many people don't take steps to set themselves up with more Social Security despite it being such a critical income source.

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The most popular age to sign up for Social Security has long been 62. And the reason is that it's the earliest age possible to collect those monthly paychecks.

But given that the median retirement savings balance among Americans aged 65 to 74 is only $200,000, per the Federal Reserve, it's clear that people should be doing more to maximize their Social Security benefits. And financial guru Suze Orman says there's one mistake retirees tend to make that often leaves them with smaller benefits than what they could've had.

Suze Orman warns about a Social Security mistake.NBC/Getty

NBC/Getty

Suze Orman says this Social Security habit is costing retirees

There's no requirement to claim Social Security benefits in conjunction with retirement. In fact, people who retire early may not be able to take benefits right away, since many folks leave the workforce prior to age 62.

But Orman has noticed a pattern among Social Security recipients, and it's that they're claiming benefits as soon as they retire. She's not a fan, though.

As Orman says, "It turns out that many people simply tie their claiming decision to when they retire. So, if someone retires at 65, they are more inclined to start receiving Social Security at 65, rather than wait."

But Orman thinks retirees should fight the urge to follow this pattern.

Orman insists that anyone in good health should wait until full retirement age to claim Social Security. For people born in 1960 or later, that's 67.

Seniors can avoid reducing their benefits for life by sitting tight until full retirement age. Given the number of people who rely on Social Security to make up for limited savings, that's crucial.

Suze Orman says waiting on Social Security could really pay off

Orman thinks the tendency to claim Social Security right away when retiring could cost many seniors a lot of money in their lifetime.

As she says, if you retire before full retirement age, " I don't want you to touch your Social Security. Rely on other assets, such as your 401(k) and IRAs rather than grabbing your Social Security benefit. Or work part time to bring in some income."

However, Orman insists that those who are able to wait until age 70 to claim Social Security will be better off financially, provided they're in good health. And the reason is that holding off on benefits beyond full retirement age boosts them by 8% a year until age 70.

The extra money that comes with waiting until 70 is a "risk-free return that can't be beat," says Orman.

But there's a reason Orman emphasizes that this advice applies to retirees in good health, and not everyone.

While waiting until age 70 to claim Social Security results in larger monthly benefits, it also means missing out on several years of earlier benefit payments. Retirees need to live long enough to come away with more lifetime Social Security when they wait to sign up, which is why those in poor health shouldn't necessarily delay their claims.

More on Suze Orman

In fact, seniors who expect a fairly short lifespan could consider signing up for Social Security early. Despite reducing their benefits on a monthly basis, this strategy could result in more lifetime income.

Otherwise, Orman stands firm in her guidance to at least wait until full retirement age.

Many seniors are caught off guard by surprise retirement expenses. Having more Social Security to fall back on makes those easier to manage.

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This story was originally published March 25, 2025 at 5:07 AM.