If you’re planning on retiring in the near future, you’re going to want to start getting your finances organized so that you’re not stressed when you reach your golden years. The sooner you start preparing for retirement, the sooner you can quit working and enjoy life.
When it comes to retirement planning, there are many financial experts that we can turn to for advice and guidance. One particular expert who we’re going to highlight today is Suze Orman because she recently gave an interview where she shared some distinctive advice for baby boomers and Gen X when it comes to retirement planning.
Suze Orman’s Top Retirement Advice for Boomers and Gen X
Suze Orman recommends that you stop financially supporting your adult children if you’re considering retirement. Orman believes that you have to tell your children that you’re no longer their bank account and that they have to figure out their finances since they’re old enough now. If you want a comfortable retirement, you have to start increasing your own contributions instead of funding your adult children so that you have more income coming in from your investments when you leave the workforce.
According to a new study done by Savings.com, nearly half of American parents are still supporting their adult children. The average financial support exceeds $1,400 monthly, which includes covering the bills for rent or mortgage payments, cellphones and groceries. In a surprising finding, the parents who are 10 years or less removed from retirement are spending the most on their children, with expenses of about $2,100. These parents are only putting $643 into their retirement accounts every month, which is not enough.
It will be challenging to finance your retirement if you’re always spending money on your children. The power of compound interest needs to be on your side as you start to think about your golden years. This means that you need to contribute additional funds to your own retirement instead of covering the expenses of your adult children. The earlier that you start to increase your retirement contributions, the more powerful the effect of compound interest will be.
You Have To Manage Your Expenses
“The more expenses you have, the more debt you have, the more income you need when you finally retire,” said Suze Orman, who wants those close to retirement age to start thinking about where their money’s going right now.
As you get closer to retirement, you’re going to want to eliminate some expenses so that you have more money to put toward your investments that will hopefully cover your lifestyle and expenses when you retire. Orman suggests downsizing in the years closer to retirement so that you can reduce mortgage and housing payments that are taking out a large chunk of your budget. These savings could be used to increase your retirement contributions. On a similar note, Orman also recommends taking care of your vehicle instead of purchasing a new one every few years.
Orman urges those planning for retirement to stop spending money on trying to impress people that they don’t even like. Orman reminds readers that they could be using the money that they save monthly to invest more in the future. All of these savings from housing costs to cutting off financial support to adult children will help lower your expenses which will allow you to save more for retirement.
What Other Retirement Preparation Advice Does Suze Orman Offer?
Suze Orman also believes that the 4% rule may not be relevant anymore. Bill Bengen, the author behind the 4% rule, originally stated that retirees should plan to take out about 4% of their assets every year in retirement. Orman remarks that you’re going to be better off financially in your retirement if you withdraw less money. She even suggested that people in their 60s continue working for a few more years to build up their retirement nest egg. She encourages you to work until you are 70 so that you can benefit from your assets adding up, and you’ll also receive the maximum benefit from Social Security at this age.
The general theme behind Orman’s retirement advice is an emphasis on why you should be contributing more money into your retirement accounts sooner rather than later so that you have more time on your side.
Are You Preparing for Retirement?
As you can see, Orman firmly believes it’s not your responsibility to cover the expenses of your adult children. You don’t want to spend your golden years stressing about how you’re going to pay the bills or feeling limited with your options. You also don’t want to work longer than you have to because you failed to take your retirement planning seriously or because you were funding your grown-up kids instead of taking care of yourself.
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