Suze Orman Says Ditch The 4% Retirement Rule: Five Strategies Suggested By The Finance Guru For Saving Smarter (2024)

Thinking about hanging up your work boots and chilling on a sunny porch someday? Financial guru Suze Orman is serving up some piping-hot advice to get your retirement savings in tip-top shape.

Here’s a pick of five crucial retirement tips suggested by Orman, including why you might want to kick the old 4% rule to the curb. Let's dive into these tips to help you plan better and retire smarter.

1. Rethink the 4% Rule

You might have heard of the 4% rule, a classic retirement strategy that says withdrawing 4% of your savings each year should keep you covered for 30 years. Sounds simple, right? Well, Orman is not on board. She suggests playing it safer with a 3% withdrawal rate. Why? Life's a rollercoaster, and the markets and economy are no different. Orman advises working longer, delaying Social Security until 70, and spending minimally. "Cut the dreams of retiring at 60 and starting Social Security at 62," she insists. If you need a withdrawal target, stick to 3%.

2. Pay Off All Debt Before Retirement

Here's a solid goal: enter retirement debt-free. Start by tackling high-interest debts, typically those pesky credit cards. Then, work your way down by interest rates. While it's okay to carry a mortgage into retirement, clearing it beforehand can give you extra breathing room.

3. Live Below Your Means

Living below your means isn’t just thrifty — it’s smart. Try to manage your essential expenses so they're only 50% to 60% of your take-home pay. This gives you a buffer for savings and investments, boosting your financial security significantly.

4. Save Smartly for Retirement

How much should you save? Aim to stash away 10% to 20% of your income for retirement. If you can save more without cramping your current lifestyle, go for it! As for where to save, Orman champions 401(k)s, especially if your employer matches contributions (hello, free money!), and Roth IRAs, where your withdrawals are tax-free in retirement.

5. Consider Working Longer

Orman believes “70 is the new 60.” If you’re worried about your financial cushion, planning to work a few extra years can be beneficial. It lets you delay dipping into Social Security and your retirement savings, giving those funds more time to grow. This strategy is particularly useful if you’re already in your 50s or 60s and feeling behind on savings.

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