Suze Orman Says You Should Avoid These 5 Financial Blunders If You Want To Live Your Best Life After Retirement

'This is so not okay': Suze Orman says avoid these 5 financial blunders if you want to live your best life after retirement

‘This is so not okay’: Suze Orman says avoid these 5 financial blunders if you want to live your best life after retirement

In times of adversity, personal finance expert Suze Orman will be the first to tell you that what you don’t do with your money may be more important than what you do with it.

The host of the Women & Money Podcast says tapping into your retirement money to help with short-term financial hardship is something many will regret when they eventually leave the workforce.

“If you can’t pay your bills while a paycheck comes in, how are you going to pay the exact same bills later in life when a paycheck stops coming in?” she said in a recent interview in Money Wise.

Here are five of her fundamental tips for avoiding mistakes that affect your future financial security so you can live comfortably into your golden years, even during the current economic downturn.

Do not miss it

1. Don’t touch your 401(k) or miss out on employer matching

If you have a 401(k) or other retirement plan through your job, don’t leave free money on the table.

Make sure you put in enough so that you get the full matching contribution from your employer.

Orman says your company can collect 50 cents for every dollar you contribute, up to 6% of your salary.

“Under those terms, if the employee contributed $3,000, the employer would contribute another $1,500,” she says on Oprah.com. “Hello! That’s a guaranteed 50% return on your investment.”

With inflation still high and many Americans’ budgets falling short, you might be tempted to borrow money from your 401(k). But Orman says this is an account you shouldn’t touch.

“That’s for when you retire. We are now living longer. So that pension account needs to get bigger.”

Taking off your 401(k) can leave you vulnerable if you ever need to file for bankruptcy, Orman says, because 401(k) accounts are bankruptcy-protected and can’t be touched if you ever need to declare it.

“So if you’re really in a horrific situation, and you’re in all this debt, you’re underwater with everything, and you have to file for bankruptcy to get out of that, you still have your retirement accounts.” Orman said in an interview with Money Wise.

WATCH NOW: Suze Orman warns poor Americans not to tap their 401(k).

2. Don’t retire because of money debts on your home

A survey by mortgage lender American Financing found that 44% of Americans in their 60s and 70s are still paying off a mortgage. And 17% said they don’t expect to ever pay it off.

“This is so not OK,” Orman has blogged.

She urges people to retire mortgage-free, for two reasons: to stretch their retirement savings and to get out of debt – an albatross that even affects mental health.

“If you’re going to live in that house for the rest of your life, pay off that mortgage as soon as you can,” Orman told CNBC.

Without a mortgage you will have more financial security when you retire, she says. So work until you’re 70, use excess emergency reserves, and do whatever it takes to get that home debt paid off.

WATCH NOW: Full Q&A with SecureSave’s Suze Orman and Devin Miller

3. Don’t retire too early

On an episode of the Afford Anything podcast, Orman was asked what she thought of the FIRE movement. That’s FIRE as in “financial independence, early retirement.”

Her blunt response: “I hate it. I hate it. I hate it. I hate it.” – sparked a firestorm among the FIRE believers at the time.

But she explained that it would cost a lot of money to retire at, say, 35 years old.

“You need at least $5 million or $6 million,” she said. “Really, you might need $10 million.” In her view, anything less would not provide you with adequate protection against a potential financial catastrophe, such as a costly illness.

“You’ll burn if you play with FIRE,” Orman told her interviewer.

Orman reminded her readers in a June 2022 blog post that there are “no retirement loans,” so it’s essential that you[saveenoughfortheretirementlifeyouwant[saveenoughfortheretirementlifeyouwant[genoegspaartvoorhetpensioenlevendatuwilt[saveenoughfortheretirementlifeyouwant

In a June blog post, she warned that “you can’t make up for lost preparations.”

“Every dollar you don’t save when you’re 30, 40, and 50 is a dollar that can’t be compounded. A $10,000 investment at age 45 will be worth about $32,000 at age 65, assuming a annual return of 6%,” she writes. .

“Invest the same $10,000 at age 55 and it will be worth less than $18,000.

4. Don’t take out a reverse mortgage in your 60s

A reverse mortgage is a type of mortgage loan for senior citizens that allows you to receive the money in one go or in monthly installments.

The loan is repaid with interest if you die or sell the home.

You can take out a reverse mortgage from age 62, but according to Orman, doing so is risky.

Read more: The 10 Best Investment Apps for Once-in-a-Generation Opportunities (Even If You’re a Beginner)

In her opinion, it’s best to treat a reverse mortgage as a last resort for emergency money, and wait as long as possible before going down that path.

“If you tap into all your equity through a reversal at age 62 and realize at age 72 that you can’t really afford the house, you have to sell the house,” she says.

In a recent interview with MoneyWise, Orman stressed the importance of emergency savings and what can happen if you’re caught unprepared for your next financial emergency.

WATCH NOW: Suze Orman tells a cautionary tale about what happens when you can’t cover your next financial emergency

5. Don’t go without a will

“Have you got your estate planning in order? If not, you might want to reconsider,” Orman writes on Oprah.com.

While everyone needs a will, most Americans don’t have one and lack other important end-of-life documents, including a revocable living will.

That’s a legal arrangement that holds your property while you’re alive and transfers it to your heirs after you die, without the complicated process known as probate.

According to a June episode of Suze Orman’s podcast, there’s one more reason to put up a living will: a disability clause.

“If you’re disabled, you get sick, you’ve appointed someone as your successor to pay your bills, to distribute money to take care of you. … A will only comes into effect when you die.”

Orman says you should establish a revocable living trust for passing on your home and other important possessions, and prepare a will for your other special possessions, such as your great-grandmother’s wedding ring or your first-edition book collection.

WATCH NOW: Full Q&A with SecureSave’s Suze Orman and Devin Miller

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This article provides information only and should not be taken as advice. It comes without any kind of warranty.

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