Author Topic: Suze Orman's first finance book in 9 years  (Read 2519 times)

MoneyGoatee

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Suze Orman's first finance book in 9 years
« on: February 27, 2020, 11:40:39 AM »
Suze Orman's new book "The Ultimate Retirement Guide for 50+" just came out, and I took a look at it.  In Chapter 5: Power Moves For Your 60s, she spent considerable time saying why you should delay claiming social security until age 70.  A key excerpt:

"A benefit you start at age 70 will be 76% higher than the benefit you will get if you start at age 62. That works out to an average annual benefit boost of more than 7% over the eight years. There is no investment in the world that guarantees you anything close to a 7% annual return. Sure, you can invest in stocks, but there is no guarantee that in eight years you will earn an annualized return of more than 7%. You might even lose money. A five-year bank certificate of deposit guarantees a return, but as I write this in late 2019, even the best deals pay less than 3% interest, as do safe Treasury bonds."

Au contrare, Ms. Orman.  I pulled up Excel, did the math, and noticed that even investing at a measly 3% annual return, claiming SS at 62 would STILL outgain claiming it at 70 until you are 86.  At 6% annual return, you would have to wait till age 100 before claiming at 70 would outgain claiming at 62.  At 7% annual return, you would have to wait till 120!  At 8%, practically never!

Ms. Orman has famously opposed FIRE, so you won't find in her book the slightest hint of endorsing retirement at 50 or earlier, despite the title.  She assumes, probably correctly for most people, that at age 50 you are still working towards a possible retirement in your 60s or 70s.

Chapter 7 is on investing for retirement for people age 50+.  Through written for older readers, most of its investing tips are fairly basic: low expense ratio, nice mix of stocks & bonds, don't try to beat the market, etc.  The two stand-out comments are: plan on living to 95 to 100; don't assume inflation will remain low; plan for 3% inflation, etc.

American GenX

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Re: Suze Orman's first finance book in 9 years
« Reply #1 on: February 27, 2020, 12:00:38 PM »
"A benefit you start at age 70 will be 76% higher than the benefit you will get if you start at age 62.

I see a bigger problem with her calculations.  That 76% increase is in "today's" dollars - a "real" return.  So the actual increase after cost of living adjustments (based on a CPI metric) would be more than 76%, yet she compared it to a 3% CD return, which is a nominal return, there's no additional increase for inflation on top of it like there is on top of the 76% figure.  So, delaying taking SS until age 70 is actually a bigger benefit than what her comment implies.  She should know better than that.  For a useful comparison, you need to compare that 76% "real" increase with "real" returns in alternate investments.  That CD may actually return less than 1% "real" interest after inflation is factored in.
« Last Edit: February 27, 2020, 12:09:48 PM by American GenX »

MoneyGoatee

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Re: Suze Orman's first finance book in 9 years
« Reply #2 on: February 27, 2020, 12:07:05 PM »
Chapter 6 is "How to Pay Yourself in Retirement" and she recommends 3% withdrawal rate instead of the often-recommended 4% mainly because she thinks the market is at an all-time high and it may dip.  She qualifies that by suggesting withdrawing 3% in the first year at least, and making withdrawal rate "flexible" as the years go on.

She seems to be about better safe than sorry: plan for age 95-100, plan for 3% inflation, withdraw 3%.

Buffaloski Boris

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Re: Suze Orman's first finance book in 9 years
« Reply #3 on: February 27, 2020, 12:44:54 PM »
Different title than what I expected. Something more along the lines of “Work till you drop.”

TomTX

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Re: Suze Orman's first finance book in 9 years
« Reply #4 on: February 27, 2020, 12:52:57 PM »
Shouldn't this be in Antimustachian Shame and Comedy?

magnet18

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Re: Suze Orman's first finance book in 9 years
« Reply #5 on: February 27, 2020, 01:01:51 PM »
I can envision her chapter on FIRE:

"50+ Retirement for FIRE Enthusiasts"
"If you haven't already starved to death, moved to a third world country, or resorted to desperate and degrading part time work: crawl back to your careers immediately and work as many hours as possible to help stave off the impending doom that will inevitably befall all those foolish enough to retire with less than 10 million dollars!"

celerystalks

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Re: Suze Orman's first finance book in 9 years
« Reply #6 on: February 27, 2020, 01:30:55 PM »
Her math doesn’t add up. She is forgetting to account for the value forgone payments one gives up by delaying taking the benefit.

dougules

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Re: Suze Orman's first finance book in 9 years
« Reply #7 on: February 27, 2020, 01:33:21 PM »
Different title than what I expected. Something more along the lines of “Work till you drop.”

Saying you shouldn't take SS until 70 is not the same as saying you shouldn't retire until 70.  Knowing her MO she may be implying that, but you have the option of just living off your investments until you hit 70. 

nereo

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Re: Suze Orman's first finance book in 9 years
« Reply #8 on: February 27, 2020, 01:37:27 PM »
It seems like the more famous she becomes as a "Financial Guru", the worse her financial advice becomes.

Until she owns up to the "You need $10MM to retire early" I have no need to listen to anything else she says.

frugaldrummer

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Re: Suze Orman's first finance book in 9 years
« Reply #9 on: February 28, 2020, 02:14:33 AM »
Her advice has always been terrible, I don’t understand how she got to be so famous.

As far as Social Security goes, I’m waiting until 70 to collect because 1) I’m in a high tax bracket currently 2) SS is the most secure of my three sources of money and the only source guaranteed to rise with inflation (somewhat - numerical shenanigans mean the inflation rate used to adjust SS is less than the actual inflation rate, I set a 1% difference between the two in my projections to be conservative) 3) extreme longevity runs in my family so I’m planning for living to age 100+.

Most people have different tax and life expectancy situations that would make it more or less sensible to do this.

I will say, my recently widowed sister is grateful that her main breadwinner husband was waiting until 70 to collect SS; her retirement benefit will be much better when she eventually retires because of that ( he was almost 70 when he died unexpectedly).


Cassie

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Re: Suze Orman's first finance book in 9 years
« Reply #10 on: February 28, 2020, 11:49:45 AM »
When she had her tv show she was telling people to work until 70 even if they had enough money to retire earlier.  3 of my friends who lived very healthy lifestyles all got cancer and died before 70.  Plus not everyone lives until 95. She is so out of touch with how normal people live.

nereo

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Re: Suze Orman's first finance book in 9 years
« Reply #11 on: February 28, 2020, 11:56:14 AM »
When she had her tv show she was telling people to work until 70 even if they had enough money to retire earlier.  3 of my friends who lived very healthy lifestyles all got cancer and died before 70.  Plus not everyone lives until 95. She is so out of touch with how normal people live.

I consider her to be Queen of the Humblebrag.
On one occasion I remember her casually dropping the fact that she owns her own private island into an otherwise unrelated discussion on a person's finances.
Her willingness to hawk her own debit card to at-risk, low-income people and then lie about what it could do for them was beyond sleezy

MustacheAndaHalf

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Re: Suze Orman's first finance book in 9 years
« Reply #12 on: February 29, 2020, 07:57:43 PM »
Interesting point about taking reduced benefits at age 62 and investing until age 70.  On investopedia.com they warn "Most investors, however, are neither disciplined nor savvy. People take early benefits intending to invest the money, then use it to tour Europe (or pay everyday bills) instead."
https://www.investopedia.com/retirement/when-take-social-security-complete-guide/

My take is that Suze Orman isn't an investment guru, but is helpful for people who are in debt and not sure how to control their spending.  But her and Dave Ramsey suffer from thinking they know investing, when they don't.

Goldielocks

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Re: Suze Orman's first finance book in 9 years
« Reply #13 on: February 29, 2020, 08:18:12 PM »
"A benefit you start at age 70 will be 76% higher than the benefit you will get if you start at age 62.

I see a bigger problem with her calculations.  That 76% increase is in "today's" dollars - a "real" return.  So the actual increase after cost of living adjustments (based on a CPI metric) would be more than 76%, yet she compared it to a 3% CD return, which is a nominal return, there's no additional increase for inflation on top of it like there is on top of the 76% figure.  So, delaying taking SS until age 70 is actually a bigger benefit than what her comment implies.  She should know better than that.  For a useful comparison, you need to compare that 76% "real" increase with "real" returns in alternate investments.  That CD may actually return less than 1% "real" interest after inflation is factored in.

Yep!  The government doesn't really care if YOU live longer or less than average.  They use a lot of actuaries to figure out how much to pay at age 72, so that it is equivalent to taking it at age 67, for the average person with average life expectancies.  They have so many people on the program, that it is all about population averages.  They use typical bond rates in their calculations.

What this means is that you can look for :
a) opportunities to reduce taxes in your specific situation -- e.g., pulling from IRA more heavily ages 60 to 70+, at lower tax rates, then claiming a defferred SS and pulling lower IRA amounts.
b)  how healthy you are and if you think you are more likely to die at 80 or 100.

nereo

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Re: Suze Orman's first finance book in 9 years
« Reply #14 on: March 01, 2020, 06:57:41 AM »
Interesting point about taking reduced benefits at age 62 and investing until age 70.  On investopedia.com they warn "Most investors, however, are neither disciplined nor savvy. People take early benefits intending to invest the money, then use it to tour Europe (or pay everyday bills) instead."
https://www.investopedia.com/retirement/when-take-social-security-complete-guide/

My take is that Suze Orman isn't an investment guru, but is helpful for people who are in debt and not sure how to control their spending.  But her and Dave Ramsey suffer from thinking they know investing, when they don't.

Very true - but most Americans are not retired before Age 62, nor are they terribly great with money

I hope that an early retiree would be better and actually invest vs spend if taking at 62.

MoneyGoatee

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Re: Suze Orman's first finance book in 9 years
« Reply #15 on: March 01, 2020, 10:34:52 AM »
I wonder if she has any desire to run a Youtube channel like Dave Ramsey and many other finance-themed Youtubers.  Love her or hate her, she is an engaging speaker and would be great for Youtube.  There are better writers than she, but some can't speak in public.  It's sort of like the movie Broadcast News: some people have all the knowledge but are terrible in talking about it, and some have less knowledge but can engage the viewers fully.  (In the movie, Holly Hunter falls in love with both men and ends up rejecting them both because she sees them as just half a man.  The message of the movie is still relevant today: you need knowledge to inform the viewers/listeners, but you also need some style points to engage them.)  Back on topic, some of Orman's views may be questionable, but everyone agrees she is incredibly engaging and effective in relaying her messages.

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Re: Suze Orman's first finance book in 9 years
« Reply #16 on: March 01, 2020, 11:56:16 AM »
I wonder if she has any desire to run a Youtube channel like Dave Ramsey and many other finance-themed Youtubers.  Love her or hate her, she is an engaging speaker and would be great for Youtube.  There are better writers than she, but some can't speak in public.  It's sort of like the movie Broadcast News: some people have all the knowledge but are terrible in talking about it, and some have less knowledge but can engage the viewers fully.  (In the movie, Holly Hunter falls in love with both men and ends up rejecting them both because she sees them as just half a man.  The message of the movie is still relevant today: you need knowledge to inform the viewers/listeners, but you also need some style points to engage them.)  Back on topic, some of Orman's views may be questionable, but everyone agrees she is incredibly engaging and effective in relaying her messages.
Right now, YT is where the money and "eyeballs" is. The only thing she would need to do is a weekly podcast, answering email questions. Super easy to develop and produce.

dougules

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Re: Suze Orman's first finance book in 9 years
« Reply #17 on: March 02, 2020, 11:06:02 AM »
Whatever you think of Suze Orman aside, the math works out better if you wait until 70 to take social security.  Even with several years of extra income you're not going to accumulate enough that the 4% SWR will be more than the increase in the payout.  You can still retire at 62 and live off your investments until 70.  If you don't have enough investments to live without SS until 70, you probably should keep working. 

EvenSteven

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Re: Suze Orman's first finance book in 9 years
« Reply #18 on: March 02, 2020, 03:03:10 PM »
Whatever you think of Suze Orman aside, the math works out better if you wait until 70 to take social security.  Even with several years of extra income you're not going to accumulate enough that the 4% SWR will be more than the increase in the payout.  You can still retire at 62 and live off your investments until 70.  If you don't have enough investments to live without SS until 70, you probably should keep working.

When I enter taking SS at 62 vs at 70 with death at age 72, my math works out to taking at 62 to be better. I must be using funny math.

EvenSteven

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Re: Suze Orman's first finance book in 9 years
« Reply #19 on: March 02, 2020, 03:07:40 PM »
Whatever you think of Suze Orman aside, the math works out better if you wait until 70 to take social security.  Even with several years of extra income you're not going to accumulate enough that the 4% SWR will be more than the increase in the payout.  You can still retire at 62 and live off your investments until 70.  If you don't have enough investments to live without SS until 70, you probably should keep working.

When I enter taking SS at 62 vs at 70 with death at age 72, my math works out to taking at 62 to be better. I must be using funny math.

Better in what way?

You get more in SS payments.

dougules

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Re: Suze Orman's first finance book in 9 years
« Reply #20 on: March 02, 2020, 03:12:38 PM »
When I enter taking SS at 62 vs at 70 with death at age 72, my math works out to taking at 62 to be better. I must be using funny math.

Better in what way?

You get more in SS payments.

Yes, but if you total all those extra payouts plus likely gains on all of them then multiply by 4%, it still doesn't add up to the bump in income. 

When it comes to finances worst case isn't that your life is short, it's that your life is long. 

EvenSteven

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Re: Suze Orman's first finance book in 9 years
« Reply #21 on: March 02, 2020, 03:16:12 PM »
When I enter taking SS at 62 vs at 70 with death at age 72, my math works out to taking at 62 to be better. I must be using funny math.

Better in what way?

You get more in SS payments.

Yes, but if you total all those extra payouts plus likely gains on all of them then multiply by 4%, it still doesn't add up to the bump in income. 

When it comes to finances worst case isn't that your life is short, it's that your life is long.

... it adds up to more than the bump in income. My point is that you can only determine the optimal time to take SS if you know your death date. None of us know that, so to blanket say that it is mathematically better to wait till 70 is wrong. It will be better for some, and worse for some.

dougules

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Re: Suze Orman's first finance book in 9 years
« Reply #22 on: March 02, 2020, 03:43:06 PM »
Yes, but if you total all those extra payouts plus likely gains on all of them then multiply by 4%, it still doesn't add up to the bump in income. 

When it comes to finances worst case isn't that your life is short, it's that your life is long.

... it adds up to more than the bump in income. My point is that you can only determine the optimal time to take SS if you know your death date. None of us know that, so to blanket say that it is mathematically better to wait till 70 is wrong. It will be better for some, and worse for some.

For the folks retiring now, the bump between 62 and 70 is 57% of the full payment.  If your SWR is 4% then you need to accumulate 14.25 x the annual full benefit for the extra income to equal that 57% of the full payment.  Some quick spreadsheet math says you'd need somewhere in the neighborhood of 25% annual returns to get there based on a 75% payment starting at age 62.

Nobody knows how long they have which is why you should plan to worst case.  Worst case financially speaking is not that you die early, but that you live a long life. 

I'm not saying you need to work longer.  You can retire and live off of your investments until 70. 
« Last Edit: March 02, 2020, 03:48:38 PM by dougules »

MustacheAndaHalf

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Re: Suze Orman's first finance book in 9 years
« Reply #23 on: March 03, 2020, 05:14:52 AM »
Whatever you think of Suze Orman aside, the math works out better if you wait until 70 to take social security.  Even with several years of extra income you're not going to accumulate enough that the 4% SWR will be more than the increase in the payout.  You can still retire at 62 and live off your investments until 70.  If you don't have enough investments to live without SS until 70, you probably should keep working.

When I enter taking SS at 62 vs at 70 with death at age 72, my math works out to taking at 62 to be better. I must be using funny math.
Real life is probably more complex, where job income between age 62 and 70 could make a difference.

nereo

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Re: Suze Orman's first finance book in 9 years
« Reply #24 on: March 03, 2020, 05:54:47 AM »
Whatever you think of Suze Orman aside, the math works out better if you wait until 70 to take social security.  Even with several years of extra income you're not going to accumulate enough that the 4% SWR will be more than the increase in the payout.  You can still retire at 62 and live off your investments until 70.  If you don't have enough investments to live without SS until 70, you probably should keep working.

When I enter taking SS at 62 vs at 70 with death at age 72, my math works out to taking at 62 to be better. I must be using funny math.
Real life is probably more complex, where job income between age 62 and 70 could make a difference.
Sure. Which is why all of these should be just a starting point. Personal situations will make the difference. For most people here, they will retire long before age 62, and typically with fewer years worked for SS payouts than the typical worker, but with as much larger savings