Suze Orman is an Emmy
Award–winning TV host,
New York Times best-selling
author and motivational
speaker. She can be contacted
Orman will answer selected
questions in this column.
She regrets that unpublished
questions cannot be
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Q&A with Suze Orman
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THERE’S NO QUESTION that planning for
retirement is a big commitment. But perhaps
an even greater challenge once you reach your
;;s is knowing when it is financially OK to
retire. If you can answer yes to the following
questions I think you are in a good position to
enjoy a financially secure retirement.
Do you appreciate how young you really are? If
you retire at age ;; there’s at least a ;; percent
chance that you will still be alive past your mid-;;s. Plenty of today’s ;;-year-olds will live into
their ;;s. If you retire at age ;; your
retirement might last three
decades, or more. That might be
an awfully long time to live off
your investments and retirement benefits.
How long your investments last depends on the
size of your starting balance when you begin to take
withdrawals, the amount
you withdraw periodically
and the growth rate for the
remaining balance. I recommend using a free online retirement income calculator that runs the
numbers to show you if your money will last
until at least age ;; (;; is an even safer bet). Or
consider hiring a fee-only financial planner to
run the numbers for you.
Are you factoring in taxes? So many people
forget that if they saved in a traditional ;;;(k)
or IRA, every withdrawal will be hit with federal
income tax. And depending on your state’s tax
system, you may owe state tax too.
Have you planned for inflation? It’s important to factor in the impact of rising living costs.
What costs you ;; today will likely cost more
than ;; in ;; years. That’s one reason I recommend that all retirees consider keeping a portion of their retirement investments in stocks.
Over the long term, stocks have produced the
best inflation-beating returns.
Can you wait until your full retirement age
before you take Social Security? You can begin to
receive your Social Security retirement benefit
at age ;;. But the amount you receive will be less
than what you will qualify for when you reach
the Social Security Administration’s full retirement age (FRA). That’s somewhere between
age ;; and ;;, depending on the year you were
born. (Enter “FRA” at the Social Security website,
ssa.gov, to find your full retirement age.)
The benefit for someone with an FRA of ;;
is reduced by ;; percent if that person starts
receiving the benefit at age ;;. That’s why I
want you to wait until you reach your FRA. An
even smarter move is to work out a strategy so
you don’t start taking Social Security for even
longer: Your benefit continues to grow each
year you delay past your FRA until you reach age
;;. The benefit at age ;; is ;; percent more than
what you would get if you start receiving the
benefit at age ;;. A tip for married couples: It is
most important that the higher wage earner
delay until age ;;; the other spouse can begin
taking a benefit earlier.
Will you retire mortgage-free? Whether you
plan to stay put in your current home or
move to another home or region,
your goal should be to live mort-
gage-free in retirement. That
removes a tremendous stress
on your monthly finances.
You aren’t planning on
a reverse mortgage in your
60s and 70s, right? It is dan-
gerous to take out a reverse
mortgage early in retire-
ment and use up your equity.
If that’s your plan, I recom-
mend selling now and reducing
your housing costs.
Have you budgeted for your health
care costs? Medicare typically covers about ;;
percent of later-life medical costs. That’s a huge
help. But you will need some cash flow to handle
Medicare premiums, deductibles and any medical expenses not covered by Medicare.
Are you aware that Medicare does not cover
long-term care costs? Unless you have amassed a
large nest egg that can cover any future assisted
living or nursing care needs, consider seeing if
you are eligible for an affordable long-term care
insurance policy. The key word is “affordable”;
even if your policy will cover only a portion of
future costs, that’s going to be a help to you and
If you answered no to a few questions, please
don’t panic. You have plenty of options.
Maybe you want to keep working a few more
years. Or maybe you can go ahead and retire
from your job while taking on some part-time
work that can help you continue to build retirement security. For example, go to the Social
Security website and find out what your age ;;
monthly benefit is projected to be. Chances are
it’s going to be ;;,;;; or so. What if you took on
some retirement work that paid you ;;,;;; a
month? That would make it easier to delay taking Social Security until you reach your FRA, or
age ;;, when you will qualify for a much larger
benefit. That’s a great way to build long-term
retirement security. C
Are you ready for retirement?