Retirement Tips From Financial Guru Suze Orman

Albert H. Teich /

Suze Orman is a personal finance guru, New York Times best-selling author and former host of “The Suze Orman Show,” which made her a two-time Emmy award winner. Plus, she’s a motivational speaker and maintains a website that’s rich with personal finance resources.

So when it comes to talking about money, Orman is highly esteemed for knowing her stuff. When it comes to something as important as retirement planning, you’ll want to consider her expert advice.

man looking at stock market analytics

1. Everyone needs stocks in their retirement portfolio.

Only 55 percent of Americans have money invested in the stock market, according to a 2015 Gallup poll. But, according to Orman, all retirement savers need stocks in their retirement portfolios.

Going all-in with so-called safe investments, like bonds, isn’t smart because that puts you at risk of outliving your money. Stocks give you a chance of outpacing inflation, Orman says on her website. So, the question is not whether you should own stock — it’s how much you should invest.

If you’re a conservative investor — or just plain scared of investing — Orman suggests keeping your age in safe investments. If you’re 60 years old, for example, devote 60 percent of your portfolio to assets like CDs. But keep the rest in stocks.

stock market numbers trending negatively

2. Use market declines to get shares.

Market fluctuations are one of the realities of stock market investing. If you have 10 or more years until retirement, you shouldn’t sell your stocks in a down market. You should look at those dips as great opportunities to get more stock, according to Orman.

Are You Retirement Ready?

Although your emotions tell you to sell when stocks dip — after all, you don’t know if the market is crashing — your first instinct should be to buy. That’s because, more often than that, the market will bounce back, and with it, your investments.

Find Out: Stocks to Buy Before Christmas

man and woman possibly having a job interview

3. Always max out matched contributions.

Orman recommends maxing out on your employer-matching contribution — and for good reason.

When you factor in contributions and growth, funds from an employer match can represent a significant portion of your retirement portfolio. But one in four U.S. workers isn’t taking full advantage of these benefits, leaving an estimated $1.4 billion on the table, according to a 2015 study from Financial Engines.

On an individual basis, people passed up an average of $1,336 in 2014. That might not sound like a lot of money, but over 30 years, that’s more than $43,000 you’re missing out on — and that’s not being invested.

If your employer offered you a raise or bonus, you wouldn’t take some and let the company keep the rest. But that’s exactly what happens when you don’t contribute enough to get your full employer match.

woman concentrating on work in her office

4. Reach your goal 1 percent at a time.

Your goal should be to devote at least 10 percent of your annual income to your retirement portfolio. But, initially, you might not be prepared to hit that target. Instead of taking an all-or-nothing approach, Orman advises on her website to start at 5 percent, and increase your savings rate by 1 percent every year.

Are You Retirement Ready?

Contributing a little at a time is better than not contributing at all. Retirement savings plans are designed to benefit from compounding interest, and the longer you delay investing, the lower your returns can be.

Saving money can be hard, unless you automate contributions. Use automatic transfers and auto-increases to help you save and stay on track with goals.

cash sticking out of an envelope with Roth IRA written on it

5. Love your Roth IRA.

One reason Orman loves Roth IRAs is because you can make tax-free withdrawals at any point during your life. Although you’ll ideally want to hold onto your money until your golden years, a Roth IRA can save you from financial trouble when you’re in a pinch.

Of course, if your employer offers a 401k program and matches contributions, you’ll want to contribute as much as you can to that plan before making contributions to your Roth IRA.

Related: What Are The Maximum 401k Limits for 2016

If your employer offers a Roth 401k and a traditional 401k, though, opt for the Roth 401k. Money that’s in a Roth 401k can be rolled over to a Roth IRA, which isn’t subject to required minimum distribution rules. That means if you don’t need the money, you don’t have to take it out.

bride and groom holding hands

6. Don’t use retirement funds for weddings.

Orman said she’s seen many cases where parents pull money out of their retirement savings or stop contributing to pay for a child’s wedding. It’s an occasion that might seem worthy of financial sacrifice, but if your retirement funds are at stake, it’s not, notes Orman on her website.

Are You Retirement Ready?

The $30,000 that’s spent on a wedding could grow to $75,000 over 18 years if it’s invested and sees 5 percent annualized returns, Orman calculated. That’s a huge opportunity cost to pay for a wedding.

Parents shouldn’t offer their retirement funds for wedding expenses and children shouldn’t accept, because there’s a strong possibility it’ll be a lose-lose situation. If your parents aren’t financially secure in retirement, Orman writes, it’ll fall on your shoulders to help them.

elderly woman in lab coat examining a document

7. Planning to work longer isn’t a retirement plan.

Orman urges people to avoid making the mistake of believing they can overspend and make up the difference by working later into their retirement years.

The 2015 Retirement Confidence Survey found that 50 percent of retirees leave the workforce earlier than planned. Sixty percent said they retired early due to health problems or disability; 27 percent said it was because of changes at work; and 22 percent said it was due to needing to care for a loved one.

That same survey found that only 22 percent of workers are “very confident” and 36 percent are “somewhat confident” in having enough money for retirement. And although the majority of people say cost of living and everyday expenses are the main reasons why they can’t save more, the amount of compound interest you lose in delaying savings isn’t worth waiting any longer to save.


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