Personal finance author and TV personality Suze Orman has been inspiring Americans for decades to make better money moves and avoid serious financial mistakes.
In times of trouble, Orman will be the first to tell you that what you don’t do with your money can be even more important than what you do with it.
And in a June 9 blog post, Orman warned against waiting too long to prepare for retirement.
“I know you’re thinking about refocusing on retirement savings once the kids are in college. But this is a dangerous assumption,” she writes.
Here are five of his most basic tips for avoiding mistakes that will affect your financial security — so you can live comfortably through your golden years, even in tough economic times.
1. Don’t retire too early
In a recent edition of the Afford Anything podcast, Orman was asked what she thinks of the FIRE movement. It’s FIRE as in “financial independence, early retirement”.
His blunt response – “I hate it. I hate it. I hate it. I hate it.” – unleashed a firestorm among FIRE worshipers.
But she explained that it would take a lot of money to make retirement work at, say, 35.
“You need at least $5 million, or $6 million,” she said. “Really, you might need 10 million dollars.” In his view, anything less would give you enough protection against potential financial disaster, such as a costly illness.
“You’re going to get burned if you play with FIRE,” Orman told his interviewer.
Orman reminded his readers in a June 2022 blog post that there are “no retirement loans,” so it’s essential that you save enough for the retirement life you want.
“Without the money you need, your adult children may have to step in and help. They will do it without asking questions, out of love. But you and I both know that will be a burden you never want to impose.
2. Don’t leave without a will
“Do you have your estate planning in place? If not, you might want to reconsider,” Orman writes on Oprah.com.
While everyone needs a will, most Americans don’t have one and miss other important end-of-life documents, including a revocable living trust.
It’s a legal arrangement that holds your assets while you’re alive and transfers them 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 another reason to set up an inter vivos trust: an incapacity clause.
“In case you are unable, you fall ill, so you appointed someone as your successor trustee to pay your bills, to distribute money to take care of you. … A will only comes into force if you are deceased.
Orman says to set up a revocable living trust to pass on your home and other major assets, and to write a will for your other special assets, like the great-grandmother’s wedding ring or your book collection. of first edition.
3. Don’t get a reverse mortgage in your 60s
A reverse mortgage is a type of home equity loan for seniors that allows you to receive the money in a lump sum or in monthly installments.
The loan is repaid, with interest, when you die or sell the home.
You can take a reverse mortgage from age 62, but Orman says it’s risky.
In his opinion, it’s best to treat a reverse mortgage as a last resort for getting emergency cash and to wait as long as possible before going that route.
“If you tap into all the equity in your home through an inversion at age 62, then at age 72 you realize you can’t really afford the house, you’ll have to sell the house,” she says.
4. Don’t miss the matching money
If you have a 401(k) or another work-based retirement plan, don’t leave free money on the table.
Make sure you contribute enough to receive the full matching contribution from your employer.
Orman says your company could contribute 50 cents for every dollar you contribute, up to 6% of your salary.
“Under these terms, if the employee contributed $3,000, the employer would inject an additional $1,500,” she tells Oprah.com. “Hello! That’s a guaranteed 50% return on your investment.”
So increase your payroll dues and start maximizing the game today.
5. Don’t retire with money for your house
A survey by mortgage banker American Financing found that 44% of Americans in their 60s and 60s are still paying off a mortgage. And 17% said they didn’t expect to ever pay it back.
“This is so not OK,” Orman wrote on his blog.
She urges people to retire mortgage-free, for two reasons: to stretch their retirement savings and get rid of debt – an albatross that even affects mental health.
“If you’re going to live in this house for the rest of your life, pay off that mortgage as soon as possible,” Orman told CNBC.
Without a mortgage, you’ll have greater financial security in retirement, she says. So work into your 70s, use the emergency savings surplus, and do whatever it takes to pay off that house debt.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.