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Suze Orman is one of the most well-known financial advisors in the U.S. and has been offering Americans advice on saving for retirement for decades.
Orman got her start with Merrill Lynch in the 1980s before eventually founding her own firm. She has written several books on financial planning and hosted a show on CNBC for more than a decade. She currently hosts Suze Orman’s “Women and Money Podcast.”
If you’re looking for advice on planning for retirement, experts like Orman can provide some insightful tips. In addition, working with a financial advisor can be a great way to develop an overall plan based on your needs and goals. Bankrate’s financial advisor matching tool can help you find an advisor in your area.
Here are Suze Orman’s top tips for saving for retirement.
1. Start saving now
“If you aren’t yet saving for retirement, yesterday was the best time to start,” said Orman in a blog post on her website.
One of the biggest reasons why it makes sense to start saving for retirement as early as you can is that the money saved early on has more time to compound and grow. If you don’t start saving until your 40s or 50s, you’ll need to save a lot more each year in order to achieve the same goal.
“Someone who starts saving 15 percent of their income by age 25 and keeps at it, will be in good shape decades from now,” Orman said on her blog. “Wait until 35 or 45 to get focused on retirement saving means having to save a lot more to land in retirement in solid shape.”
2. Take advantage of an employer match
When it comes to choosing how to save for retirement, Orman suggests starting with your employer’s plan.
“If your employer offers a retirement plan and also kicks in a matching contribution, that is the place to start,” Orman said on her blog. “Never turn down a matching contribution.”
Many employers offer to match an employee’s contributions up to a certain percentage of the employee’s earnings. For example, you may get a 100 percent employer match on up to 3 percent of your salary. So, contributing 3 percent yourself gets you a total contribution of 6 percent. Many financial advisors refer to the employer match as “free money.”
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3. Utilize Roth accounts
Another decision you’ll have to make is whether to save using a traditional or Roth retirement account.
“With a Roth 401(k) you contribute money that has already been taxed,” Orman said on her blog. “Then it can grow for decades tax-exempt, and when you make withdrawals in retirement you get the big win: no tax is due on your withdrawal.”
There can be instances where a traditional account makes more sense, but Orman believes Roth accounts are best for most people.
“Unless you have a tax and retirement planning pro who has run the numbers and suggests you save in a traditional [account], I think the Roth is the way to go,” she said. “Especially because tax rates right now are at historic lows.”
4. Diversify your investments
Orman is also an advocate for diversifying your financial assets, pointing out that people who rely on their home as their sole asset face risks they don’t always realize.
“The point is that diversification is not just about your investment portfolio. It is about all your financial investments,” Orman said in a LinkedIn post. “To have all your financial future riding on a single asset — real estate — is just as dangerous as only investing in the stock market. Or only investing in tech stocks.”
Owning different assets that balance each other out is the best approach, according to Orman.
“Diversification is about having stakes in multiple types of assets. Stocks. Real Estate. Cash. Maybe bonds. Maybe a little Bitcoin if you are following that market,” she said.
5. Plan to delay Social Security
Orman also suggests something that most people may not think of when it comes to planning for retirement. She says you should plan to delay the start of your Social Security benefits as a way to boost the payout you ultimately receive.
“You are allowed to start [receiving benefits] at 62, but every month you wait earns you a higher benefit,” Orman said on her blog. “The benefit at your full retirement age (between 66 and 67, depending on the year you were born) will be 25 percent to 30 percent higher than your age 62 benefit. Wait until age 70 to start — the oldest age at which waiting earns you a higher benefit — and your monthly payout will be 76 percent higher than what you are eligible for at age 62.”
The key is to plan for how you’ll bridge the gap between when you retire and when you start taking Social Security. A financial advisor can help you develop a plan that works best for your individual financial situation.
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.
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