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Could you take early retirement? Here’s what Suze Orman thinks

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You are not a multi-millionaire? Suze Orman says not to retire early.


Key points

  • Orman says retiring early could be the “biggest mistake” of your life.
  • She suggests you shouldn’t retire early unless you have $20 million or more.
  • According to Orman, AI, unemployment rates, rising taxes and insurance costs are all reasons not to retire early.

For many people, working until the traditional retirement age – around 70 or so – is, well, terrifying. Which makes sense; only about a third of workers (34%) feel engaged at work and 16% feel active disengaged.

Not only has this dissatisfaction led many workers to find both a new job and a new career, but it is also causing more and more people to consider the idea of ​​early retirement. One of the most important movements in favor of early retirement is called FIRE, short for “Financially Independent, Retire Early”.

The FIRE movement has been around for years, and it’s had its fair share of supporters — and detractors. Not too long ago, famed personal finance guru Suze Orman made it clear that she was firmly on the latter side. In fact, when asked about it in a 2018 interview, her response was, “I hate it. I hate it. I hate it.”

“You will get burned if you play with FIRE”

Indeed, Orman seems to be strongly opposed not just to the FIRE movement, but to the whole idea of ​​early retirement. She goes so far as to call early retirement “the biggest mistake, financially speaking, you will ever, ever make in your life.”

Instead, she insists people should wait until they’re 70 to retire, that is, unless their bank accounts are essentially as large as hers.

“If you have $20 [million]$30 [million]$50 [million], or 100 million dollars, do as I do. If you have that kind of money and you want to retire, fine,” she said. But a million or two in reserve won’t be enough.

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“Two million is nothing. It’s nothing. It’s pennies in today’s world, to tell you the truth,” she said. “$2 million when you’re in your thirties — you might think that’s a lot and you can live on $80,000…you can have fun for 2 years, 3 years, 4 years, 5 years, and I hope nothing will. But I promise you that as you get older, and I hope you will, if you think $80.00 a year… is going to get you before taxes, I have a bridge to sell you.

Why do you need so much? Orman has a long list of concerns, many of which are catastrophic events that would put just about anyone in bad shape. She is also convinced that artificial intelligence is going to have serious repercussions on everything from unemployment to taxes, making retirement difficult for future generations.

“Artificial intelligence is coming fast, don’t be surprised if by 2030 there is a 25% unemployment rate,” she explained. “When people stop working because machines have replaced us all, no one will pay in the tax structure. When no one pays taxes, the tax brackets will have no choice but to go up. It there will be no money for Social Security.”

The compound years of your life

Another part of Orman’s argument against early retirement is that you’ll miss out on a significant amount of potential compound interest if you don’t add to your investments when you’re relatively young.

“If you achieve financial independence and don’t put any more money into your retirement accounts, you lose the compound years of your life,” she explained. “When you’re younger, your money that you invest earns money, and that money earns, and that money earns – and your money accumulates. And you can’t offset that with amounts of money later on. in life.”

On this point, it makes a certain sense. The more time your money has to accumulate, the more money you will end up with. The earlier you start saving — and the more you save in those early years — the better off you’ll be when you’re older. But to say that you can’t retire early without amassing tens of millions of dollars seems irrelevant at best.

At a minimum, pay off your mortgage and get insurance

Asked about older workers who have not yet retired but are not near the $20 million mark, Orman has somewhat conflicting advice.

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These workers, she says, are likely doing well. As long as they continue to fund their retirement accounts, live below their means, and pay off their mortgages before retiring, they should be financially ready to retire at age 70.

So what is the difference? According to Orman, it’s both a matter of insurance and the fact that they have intact retirement funds.

“The worker who retires at 30, if something goes wrong [age] 30 to 70, now they have problems,” she said. As for the person who works until the traditional retirement age, well, he has his job. “The other worker is probably covered by the policies and whatever is at work. Once they retire and they’re 70, now, okay, they still have their wallets, they haven’t depleted them.”

Taking that argument in stride, it seems Orman shouldn’t be against early retirement per se, so much as early retirement that doesn’t factor in insurance costs. As long as you’ve paid off your mortgage and arranged for health and disability insurance throughout your early retirement, you should be as prepared as someone retiring later in life.

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