Suze Orman’s Retirement Checklist Could Help You Retire Comfortably
Written by
Mary Green
Edited by
Levi Leidy
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Many Americans are anxious about their retirement plans, and that’s no surprise — the process can feel completely overwhelming. That’s why getting expert financial advice can be a game-changer.
So, if the thought of retirement makes you break out in a cold sweat, take a deep breath. Here are some of money expert Suze Orman’s best retirement tips, designed to take the stress out of retirement planning.
Tip 1: Get Started Early
Most young adults don’t spend a lot of time thinking about retirement, but maybe they should. According to Orman’s website, 20-somethings should start planning for their golden years by socking away 15% of their income in a retirement account.
Starting to save early means your investments will have plenty of time to grow. Through the beauty of compound interest, even small contributions to a retirement fund will yield significant wealth.
Orman recommends that young people open an IRA, ideally a Roth IRA. She also recommends automating your savings so that you’re not tempted to overspend when your paycheck rolls in.
Tip 2: Slash Your Spending
Saving can be tough, especially in today’s economy. Still, Orman says that most of us can afford to save at least a few hundred more dollars every month.
According to Orman, many Americans are deeply discouraged by their financial challenges. Unfortunately, when people are discouraged, they don’t save as much as they really should. That’s why Orman’s advice is to dig deep, inspect every item on your budget and make sure that you cut your spending to a minimum — so that you can save the rest for retirement.
Orman explained the benefits of living beneath your means in a Facebook post: “When you live below your means, you will always have money you can put toward long-term goals, such as retirement. Moreover, by living within your means today, you are effectively reducing the lifestyle you will need to support in retirement.”
Tip 3: Invest In a Roth IRA
Orman is a huge fan of Roth IRAs. To refresh your memory, those are the retirement accounts that allow you to make tax-free withdrawals once you’re in retirement.
With a traditional IRA, the money you contribute is pre-tax. In other words, it doesn’t count as part of your taxable income. However, when you withdraw money from a traditional IRA, you pay taxes on it as if it were part of your earned income.
Paying taxes while in retirement will impact your income and your lifestyle. Withdrawing money from a traditional IRA can even impact your Medicare fees, since those are determined based on your taxable income. That’s why Orman recommends putting as much as possible into a Roth IRA and paying taxes now instead of later.
Tip 4: Plan For a Long Retirement and a Long Life
More people are living long lives these days, and it’s important to plan your retirement accordingly. Orman wants everyone to budget for a long retirement so that you get to enjoy every single one of your golden years — without running out of cash.
As she explained on her blog, “I think a cornerstone of a retirement plan for everyone without a serious illness today, should be that you expect to live until at least age 95. For total sleep-at-night calm, or if, like me, you have family who lived even longer, setting your retirement plan to age 100 makes terrific sense.”
Orman recommends not taking Social Security benefits until you turn 70, so that you can take advantage of the higher monthly benefit. She also suggests leaving some of your investments in stocks, which often have a higher yield than bonds.
The bottom line? Plan carefully today, so that you can live your retirement in peace and security.
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