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Suze Orman's Guide to Retirement Planning

The money expert shares advice on making your retirement happy and secure

Suze Orman

AARP/Getty Images

Bob Edwards:

Suze Orman, money expert and our guest today, says your spirit—your attitude—is key to securing a brighter financial future. Today, we discuss how looking forward, instead of reflecting on the past, can help to avoid more missteps.

Suze Orman:

Money really does make your world go round. It really does. And you’re gonna have to be the one who decides, does it spiral up or does it spiral down.

Bob Edwards:

When it comes to financial planning, Suze Orman gives it to you straight. In fact, you might remember her classic catch phrase from The Suze Orman Show on CNBC:

Suze Orman:

Are you kidding? You are denied! I have to tell you – denied! Denied!

Bob Edwards:

She’s known for her tough-love way of telling people when they’re in danger of making a money mistake.

Her cover story for the latest March issue of AARP Bulletin likewise warns against bad spending choices. But this time, she tells readers how to best plan for retirement, whether it’s decades away, years or even if it’s already started. 

You can find the article at www.AARP.org/Bulletin and in our show notes. It’s adapted from her new book, The Ultimate Retirement Guide for 50 plus: Winning Strategies to Make Your Money Last a Lifetime. 

Today, we welcome Orman back to our show to talk more about her work and ways to secure a happy and steady retirement.

<Interview begins> 

Why made you want to write this book?

Suze Orman:

Nobody is paying attention to this age group. I get AARP is, but it doesn't seem like many other people are on any level. So, and now that I am going to be 69 you know Bob, it's a lot different writing a book when you're 69 for people essentially 50, 60, and 70 and 80 and 90 than when you're 45 and writing a book to older people because there's an emotional component and a psychological component about getting older that this book has in it that I wasn't able to bring to my books when I was younger. 

Bob Edwards:

I'm sure some fundamentals of retirement have stayed the same, but how have things changed since you first started doing this work?

Suze Orman:

When I first started, people when they would retire, they retired not only with a pension, but they retired with a fully paid health insurance policy all the way until they died that covered their entire family. Interest rates way back then in the 80s were at 16, 17, 18% at one point they went as high as 21% so if you wanted to keep your money safe and sound you could simply put it in a 30 year treasury bond, which I did for most of my clients that were retiring. And you could lock in 14 and a half percent for 30 years, no risk, nothing. Now granted back then the market hadn't even broken a thousand let alone 2000, the Dow Jones industrial average. But back then you still were able to buy stocks. We hadn't gone that high. Everything wasn't as speculative.

Real estate was still affordable. It wasn't that big of a deal in terms of what you should do with your money. Today, the market, even though it's had a blip here for now, it's still at its all time high. Interest rates not only are at their all time low, but they're going lower. When you have a 10 year treasury at 1.03% that's like, are you kidding me? And then you have real estate that has also skyrocketed and then you're dealing with no health insurance normally, now all you have is Medicare to take care of you and now you have to buy your own supplemental. You don't get a pension, most likely. So a lot has changed.

Bob Edwards:

This is why you say a lot of people are fearful and anxious about retirement.

Suze Orman:

Of course they are. Because let's say all of a sudden you saw that in one week the market went down 3,500 or 4,000 points and you saw that you lost 10 or 15% in your own portfolio and now you're scared to death and you don't really want to be in the stock market. You're afraid. You don't have time to earn this money again. Here is the question, what do you do with that money? Do you put it in a treasury at 1% taxable? And now you find yourself having to take out 4% a year just to live on and all of a sudden you're watching, it doesn't work anymore. So the great thing about this new book is I'm very specific in it. In one chapter I tell you this is exactly what I want you to do.

This is how I want you to take your retirement. This is what I want you to invest in. And I really am their guide through their 50s, their 60s, their 70s and beyond. Because here is the real problem. I have a podcast called The Women In Money podcast and the Men Smart Enough to Listen and the number of women who are in their fifties sixties and seventies that are writing into me now, and what they're saying to me is, "Suze, please tell me what to do. My spouse has just died. I just got divorced. I'm starting over. This happened to me and nobody's guiding me. Please Suze, I don't know who else to go to." And now they can go to this book.

Bob Edwards:

So the people who are fearful and anxious about retirement, what do you say to them?

Suze Orman:

So I'm now into this thing, and this is probably going to surprise you, but I really want everybody to be covered or at least know what are their guaranteed sources of income because I don't think we can count anymore on all right, so now you have a piece of property and somebody's renting from you and let's say that person gets sick or whatever happens, can that person always continue to pay you the rent? And you may think you can kick them out right away. But what if you can't? What if they don't get out? So I really want to know what are your guaranteed sources of income? What is your social security? And as you may know, and I really hammer it home in the book, why I make a case for I am begging all of you to work until you are 70 and not take social security until you are 70. I am begging you to please do that.

But so besides social security, what other sources of guaranteed income do you really have? And if in fact we're short and we don't know what to do, then I'm asking everybody, all right let's at least make sure that during your working years, you pay off the mortgage on your home so that when you retire, your biggest expense is gone. And I really think people might want to start looking into an annuity believe it or not, that pays you a guaranteed income. And I can give you an example as to how a few years ago I did this with a woman in her seventies and she is so happy right now it's not even funny.

Bob Edwards:

The March issue of AARP bulletin includes a cover story that's adapted from your new book and includes steps people can take to create a better future. So what are some changes people can make today?

Suze Orman:

So changes that you can make right now. Let's say that you are living in a home that still has a mortgage and you really do want to stay in that home for the rest of your life. Then I am asking you that if you have a retirement account that you contribute to and they match your contribution, you put in a dollar, they give you 50 cents, something like that. I'm asking you to absolutely contribute up to the point of the match, but after the point of the match or if your company does not match and you only have a few years left until you do retire, I am asking you to make sure that your extra money does what? It goes to pay off the mortgage on your home so that when you do retire, you don't have that major expense. The less amount of money that you owe, the less you need in a retirement account to generate the income to pay those expenses. It is far easier to get rid of all your debt.

If you are not going to be staying in that house for the rest of your life and you are finding that you are going to be short on retirement, you know it. You're still living paycheck to paycheck, whatever it may be. I am asking you right now, rather than to wait until you retire, sell the house, then when you retire, I am asking you to sell the house now and to downsize now. One of the biggest mistakes people make as they are getting older, they hang on to their home that they really can't afford until they actually retire and at that time that's when they sell it. But that could be seven years from now. If they could simply just sell it now, take the equity they have in their home now, maybe buy a smaller condo or something now or rent now they would be so much further ahead. I can't even tell you. Those are a few of the things.

Bob Edwards:

Yeah, people can get pretty emotional about doing things like downsizing.

Suze Orman:

They can but want to know what's even more emotional? That now you're no longer working and you don't have the money to really retire and so now you have to go and get another job and another job. And now you have your money in the stock market and all of a sudden it's down 15% and so now this thing about you taking out money every single month to live on. Now if you have to take out a specific sum of money and you're taking that specific sum from a lesser amount, it's going to deplete the amount in your retirement accounts even that much faster. So remember you also have to take into consideration income taxes. So the other thing that I'm asking people to do is in their contributions to the retirement plans that they may be making now, if your company happens to offer you a Roth 401k, a Roth 403b or TSP, can you just do the Roth part and stop going for the tax write off right now.

A Roth, as you probably know, is a retirement account that you contribute to with after tax money, but that allows you to take it out totally tax free later on in life. And so you want to know that you have access to money tax free because what you have in a traditional retirement account, which means pre tax, what you see is not what you get because taxes have to go up. If something happens, you're not going to be able to take out as much money as you think.

Bob Edwards:

In your article, you talk about cutting off adult children as a way to reduce expenses. Now, how should parents approach that conversation?

Suze Orman:

Very simply. Here use me as an excuse. I was reading in the AARP newsletter how Suze Orman says this, I read this in her book and you know what? It absolutely makes sense and let me give you an example why. On my Women And Money podcast, obviously I have women who are 50, 60, 70, and 80 and older writing in and listening, but I also have their kids listening. The ones that are 35, 40, 50 that now for whatever reason, their parents didn't plan correctly and now they're having to support financially their parents. And do you know what every one of them says? Why did they pay for my student loans? Why did they pay for my wedding? Why are they still giving me gifts for all the holidays and taking care of the grandkids when I have to spend the money that I'm earning now for the rest of my life to take care of them?

Suze, I would have been better off if I just had a student loan and in 10 or 15 years it would have been paid off. Now for the rest of their life Suze, I have to take care of them and I love them, but I can't afford to buy them a new heater for $7,000. I can't afford to buy them a new car. And those are the things that they need and when they get older and how am I going to take care of them, Suze? That's why.

Bob Edwards:

So you have advice for both groups, the parents that should cut off their children, the adult children who are supporting the parents?

Suze Orman:

Yeah. Well, no, the kids have to support their parents. What else are they going to do? But if parents are listening, if you're flush with money, you can do anything you want. But if you're not, you better be careful.

Bob Edwards:

So you're known for combining tough love and compassion when giving financial advice and you do the same in your book and your article. Why is tough love so important when it comes to finances and retirement?

Suze Orman:

Because people are so used to lying when it comes to their money. You think everybody is so wealthy, they look like they play the part while they always have a new car, they're always going on vacations, they're always wearing designer clothes and the truth of the matter is they don't have a pot to pee in. And so everybody is trying to keep up with other families that absolutely have no money. And we're all used to not telling the truth about money. And so sometimes you can be nice but nobody changes. They don't hear you. And it's such a difficult topic to even want to talk about, let alone hear the truth about your situation. So sometimes helping is hurting and hurting is helping because when you stand in the truth and you say, "I'm sorry, I can't afford to take out a student loan for you, I'm barely making it right now. You need to go to a community college."

When you stand in your truth, then all of you benefit because otherwise we all continue to pass the message of less. The silent message of less down from generation to generation. My parents paid for my student loans. I'm going to pay for my kid's student loans. And really it is so sad it's not even funny. If we just told the truth everything would be great.

Bob Edwards:

Nobody wants to have a money conversation.

Suze Orman:

No, nobody does. But guess what? There isn't a part of your life that money doesn't touch, not a part of your life. And while I'll be the first to tell you that money alone will never make you happy, I will also be the first to tell you however, that lack of money sure will make you miserable. And there is nothing sadder that when I get, and I glad to send you some of them, emails from 71 year old women who have absolutely no money except for their social security check now to live on. Suze, what can I do? And do you know how horrible that it feels for somebody like a Suze Orman to not have an answer for them? Because sometimes there's nothing I can do to help you. So you have to take the steps now while you can to help yourself make the right investment decisions when you are 50, make the right moves when you are 60, take social security when you are 70, downsize as soon as you possibly can. Cut back your expenses. Look into an income annuity, know how to invest, do a Roth IRA.

Stay away from variable universal and whole life insurance policies. Do not let somebody tell you take your entire 401k and put it into an annuity. Biggest mistake you'll ever make, everybody. So you've got to know what to do. And I'm asking all of you who are listening to this to let me be your guide so that you really can live your ultimate retirement.

Bob Edwards:

But isn't that why families blow up? Over money?

Suze Orman:

They do blow up over money. Very wealthy families blow up over money and poor families blow up over money. Usually the poor families blow up because it usually falls on one kid and it's usually not the kid who makes the most amount of money that has to come up with the money to take care of their family, their parents, and when their parents die do you think that one kid's going to have a relationship with their two siblings who made more money than them but wouldn't pitch in to take care of mom and dad? I'm here to tell you they won't. They won't.

Suze Orman:

So yes, money really does make your world go round. It really does. And you're going to have to be the one who decides does it spiral up or does it spiral down? I have a new PBS special that's running right now called The Ultimate Retirement Guide and everybody should watch it. They should watch it because what's what, there's a conversation in there with a mother and a daughter that I find just fascinating.

Bob Edwards:

You start looking to the end. You want to be remembered as the good guy.

Suze Orman:

Yes. I want to be remembered as the good guy. I want to be remembered as the one who had the best interest at heart of all the people. My entire career, whether it was on Suze Orman show that was on CNBC for 13 years or even my Women In Money podcast right now is that I'm looking to help people who feel like there's no hope for them. They don't have money. These fancy schmancy financial advisors aren't interested in talking to them because all they have is what they have and it's usually not enough. So I want to know that I'm the one who was able to really let people know that they're cared about and there are things that they can do. And that you don't have to give up hope. And I am willing to listen to you.

Suze Orman:

And I do read your thousands of emails that come into the Women In Money podcast. And I do try to answer almost everyone that I possibly can. And yeah, and even if the public in general doesn't know me for that, I know that the people whose lives I've touched, Oh, you betcha, they know what I've done for them.

<Interview ends>

Bob Edwards:

That was Suze Orman, whose March 2020 AARP Bulletin article and new book ‘The Ultimate Retirement Guide for 50 Plus: Winning Strategies to Make Your Money Last a Lifetime’ are available in the show notes.

If you liked this episode, we’d love to hear from you. Our email address is newspodcast@aarp.org

Thank you to our news team: 

Producer Colby Nelson

Assistant Producer Danny Alarcon

Production Assistants Brigid Lowney 

Engineer Julio Gonzales

Writer Jill Higgs

Executive Producer Jason Young 

And, of course, my co-hosts Wilma Consul and Mike Ellison.

Become a subscriber on Apple podcasts, Google Play, Stitcher and other apps. Be sure to rate our show as well.

For an AARP Take On Today, I’m Bob Edwards. Thanks for listening.

Money expert Suze Orman joins us today to talk about her new book and gives tough-love advice on making sure your retirement is happy, secure and steady.

We want to hear from you! Email the Take on Today team at newspodcast@aarp.org

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