Want to Retire Early? The Minimum You Need According to Suze Orman
Almost everyone dreams of retiring early, but for many, it’s a pipe dream. Some people will have to work well beyond retirement age because they have too little, or worse, no savings.
The internet is rife with people offering retirement advice, some of it conflicting. However, personal finance gurus like Suze Orman dig beyond the surface to thoroughly evaluate significant factors such as the economy and inflation, and how it can impact your quality of life in your golden years.
In a 2018 podcast episode, Orman spoke about the Financial Independence Retire Early (FIRE) movement, and needless to say, she absolutely wasn’t a fan of it. She believes younger people need a lot more than they think they do to retire.
Who Is Suze Orman?
Suze Orman is a financial advisor with decades of experience in the finance sector. She started the Suze Orman Financial Group in 1987. That led to her having her own show on CNBC and the “Women & Money” podcast.
Orman makes it a goal to break finance topics down into simple-to-understand terms that resonate with everyday people. Before that, she was a waitress.
$2 Million Is Not Enough
When Orman appeared on a 2018 episode of the podcast “Afford Anything” she likely shocked a lot of people when she said that $2 million is nowhere near enough to retire on if you subscribe to the FIRE methodology. In fact, Orman said, “It’s pennies in today’s world.”
So, what’s a reasonable sum, according to the financial guru? She said it depends on a variety of factors, but closer to $5 or $10 million if you want to retire before you’re 60. In the absence of that, she says having ten times your income saved by 67 is ideal.
What Is Orman’s Reasoning?
Orman went into great detail about why she thinks $5 million is the magic number at a minimum. She called into question how, if you retire at 25 or 30, you will sustain yourself, not being able to touch retirement funds until later in life.
Then, Orman cautions that life when you’re older is more expensive, namely due to health issues. But there’s always the chance of an accident, too, and you can’t plan for that. So, if you have $2 million saved, while it may seem like a significant sum, it can go quickly.
How Can I Get to $5 Million?
The earlier you start preparing for retirement, the higher the likelihood you’ll make it to $5 million. It’s a lofty milestone to achieve, but not impossible. You just have to set stringent savings goals and stick to them.
You’ll have to be aggressive, which means putting away between 10 to 15% of your salary. Additionally, age plays a factor. You’ll have to put away more if you start at 35 versus beginning at 25. It could be the difference between needing to save $2,000 and needing to put away $3,300 per month.
How Do You Know if You Have Enough?
If you find that you cannot reach the goal of $5 million, let alone $10 million, that doesn’t mean you won’t have enough to retire. Everyone’s financial situation is different.
Some people have $1 million or less when they finish working and they do just fine. It’s a matter of budgeting. How flashy do you live? Do you own your own home? What state do you live in? These are all important questions that will determine how much you need to have put away.
How To Catch Up
If you fall way below the thresholds outlined above, there are several things you can do to catch up. Maxing out your retirement each year is a must. Take advantage of employer-matched contributions. It’s free money that will benefit you so much more.
In your earlier years, you can afford to be a little riskier with your investments, especially since you’re in it for the long haul. But as you get closer to retirement, or you hit the milestones you’re after, start playing it safer.
Suse Orman made these remarks in a 2018 podcast episode.
