5 Money Moves Suze Orman Recommends for a More Secure Retirement
When it comes to retirement planning, few voices are as influential as Suze Orman. As a New York Times best-selling author and former Emmy-winning television personality, Orman is a financial advice powerhouse.
Needless to say, she is highly esteemed for knowing her stuff. When it comes to retirement, she has several helpful tips and tricks to make sure you're prepared. Here are five retirement strategies from Orman to help you build a secure financial future.
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1. Prioritize Roth Accounts Over Traditional Ones
Orman strongly recommends Roth IRAs and Roth 401(k)s for all income levels. She argues there's no reason to choose traditional tax-deferred accounts when Roth accounts offer tax-free growth and withdrawals.
One reason Orman loves Roth IRAs specifically is that 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 401(k) program and matches contributions, you'll want to contribute as much as you can to that plan before making contributions to your Roth IRA.
If your employer offers a Roth 401(k) and a traditional 401(k), though, opt for the Roth 401(k). Money that's in a Roth 401(k) 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.
2. Use Market Dips as Buying Opportunities
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. That's because, more often than not, the market will bounce back, and with it, your investments.
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3. Maximize Employer 401(k) Matches
Failing to claim an employer match on your 401(k) is like leaving free money on the table. Orman has emphasized contributing enough to get the full match, which can add up to tens of thousands of dollars over time.
4. Avoid Depleting Funds With Big Ticket Purchases
Big life events like getting married shouldn't make you go broke. Orman has 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 Orman said if your retirement funds are at stake, it's not.
The $30,000 that's spent on a wedding could grow to $75,000 over 18 years if it's invested and sees 5% annualized returns. That's a huge opportunity cost to pay for a wedding.
5. Diversify With Stocks for Long-Term Growth
Forget relying solely on bonds or CDs. Orman has stressed the importance of including stocks in every retirement portfolio to outpace inflation and boost returns over time. A balanced rule-of-thumb: Keep your age in safe assets and invest the rest in stock.
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, wrote Orman. So, the question is not whether you should own stock, it's how much you should invest.
Michelle Smith contributed to the reporting for this article.
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