Suze Orman’s Retirement Dos and Don’ts

suze ormanWe’ve always valued Suze Orman’s advice and when we saw this retirement checklist in the Costco Connection magazine, I wanted to share her tips. Because my wife and I are at the retirement age already, we have some regrets on items we should have done in our early years. We hope this checklist will help others not make the mistakes we did!

Suze Orman’s Retirement Checklist by the Decade

In Your 20s and 30s

Don’t waste time. Right now you possess one ofthe biggest investment advantages there is: time. Money you save today will be able to compound for decades. Delay saving until you’re in your 40s and you’ve squandered your time advantage and will have to save much more than if you diligently start saving right now.

Pocket the maximum match. If your employer offers a matching contribution to a 401(k) or other retirement plan, you are nuts to pass it up. That’s free money. Always contribute enough to qualify for the maximum employer match. (And see my next tip for what to do after that.) If your employer offers a Roth 401(k), check it out: You don’t get a tax break on your contributions, but all withdrawals in retirement
will be 100 percent tax free.

Fund a Roth IRA. After you’ve contributed enough to your company plan to get the maximum match, or if there’s no match, switch your focus to funding a Roth IRA. This year anyone under the age of 50 can contribute up to $5,500. Set up an automatic monthly or quarterly transfer from your checking account into a Roth to ensure you follow through on your good intentions.


In Your 40s

No kidding around. For those of you withschool-age kids, your 40s are typically when you start sweating how you’ll pay for their college. If you truly love your kids, their college planning should take a backseat to your retirement planning: If you aren’t on track with your retirement savings, you are not to save a penny for the kids’ college costs. Your kids can borrow for college; you can’t borrow for retirement.

Keep the pedal to the metal. By now you should be depositing a minimum of 10 percent of your annual income into retirement accounts. If you didn’t start saving in your 20s, push yourself to get to 15 percent.

Roll over your old 401(k)s. I bet you’ve changed jobs once or twice, but your 401(k) is still back at the old job. That can be a costly mistake. You can likely reduce your investment expenses by doing what is called a direct 401(k) rollover: Move your 401(k) to a discount brokerage or fund company that gives you access to super-low-cost exchange-traded funds (ETFs). Plenty of ETFs charge an annual expense ratio of less than 0.25 percent a year. That can be a full percentage point less than what many mutual funds inside 401(k)s charge. Saving 1 percent or so a year can translate into a retirement
account worth tens of thousands of dollars more come retirement.


In your 50s

Consider accelerating your mortgage payments.
If you plan to live in your current home through retirement, a smart strategy is to get your
mortgage paid off before you stop working. It’s one major monthly expense you will be so glad you don’t have to worry about once you are retired.

No early withdrawals. Reducing your retirement assets in your 50s can be very dangerous if you live well into your 80s or 90s. And that’s what you should be planning for, given our expanding life expectancies: Half of today’s 65-year-olds will be alive (and needing retirement income) into their mid-80s, and beyond.

Size up long-term-care (LTC) insurance. I encourage everyone to look into LTC insurance, and, if you’re interested, to purchase it sooner rather than later. Wait until your late 50s or 60s and you might have a preexisting condition that precludes you from getting a policy, or you may find the premiums too costly.

In your 60s

Play the waiting game and get a Social Security check that is worth 76 percent more. When you turn 62 you are eligible to start collecting your Social Security retirement check. But you need to understand that the longer you wait to start, the bigger your benefit will be. Wait until what the Social Security folks call your full retirement age (somewhere between age 66 and 67, depending on your year of birth) and your benefit will be 25 to 30 percent higher than if you start at age 62. And if you can manage to wait until age 70 to claim your benefit, it will be 76 percent higher than at age 62. Sure, you could take the benefit early and invest the money, but you’ll have to take on plenty of risk to earn those high returns. Social Security’s higher benefits for delaying are 100 percent guaranteed.

One smart strategy for married couples to consider: Have the higher earner delay while the lower earner can claim earlier to generate income. You can learn more about claiming strategies at the AARP website (; search “claiming strategies”).
AARP also offers an on -line calculator to help youestimate your Social Security benefits, under “Social Security.”

You can read Suze’s full article at

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