Really BAD Financial Advice

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If you follow personal finance news at all, you may have recently seen Suze Orman making headlines by throwing up all over the FIRE (financially independent & retired early) movement.  When it comes to FIRE, she says she “Hates it. Hates it. Hates it.” and it may be the “dumbest personal finance decision” people can make.

I’ve written before about Orman’s highly suspect financial expertise and these comments show why she is a better marketer than financial advisor.  While making headlines, she is unfortunately reinforcing the tired narrative that only wealthy people can retire and that Americans are victims of the financial system.

It’s hard to even understand the spending assumptions that she is making, given her lofty savings targets for FIRE.  She said “you need at least $5 million, or $6 million” saved or “really, you need $10 million”.

When thinking about saving for FIRE, I typically suggest people try to plan to have a nest egg about 30x-35x their expected retirement spending in savings.  The Trinity Study suggests a 25x multiplier, but that is for a retirement a 30 year retirement.  If you are shooting for an early retirement at age 50 or 55, you should plan for more.

Since the average USA household makes $59K a year, a 30x-35x savings multiplier means you would need a retirement nest egg of around $2 million.  Orman’s $5 to $10 million target implies an outrageous 85x-169x savings multiplier.  That’s a huge difference.  Frankly, the average American household might never make enough to reach her targets.

The result is many people are being delivered the message that they can’t afford early retirement and should plan to work until their late 60s or 70 years old.  In fact, Orman said that she thinks 70 is a practical retirement age to shoot for.  That’s a full eight years of full-time work beyond what the average American works today.

Is that what you expect from a ‘financial expert’?  They try to convince you to to work 8 years longer than needed so that you have less time, energy, and freedom to enjoy your life?  No wonder that many people give up saving at all, given the degree of challenge that is presented.

Simply put, I find Orman an incredibly poor source of financial advice, but I fear she is an even worse source of LIFE advice.  In answering the important question of ‘your money or your life?’ – she prioritizes money above the rest of your life – things that are the actual source of happiness.  While she has always focused on talking about the ’emotions’ of money, the only emotion she is trading on now seems to be living your life in financial FEAR.

Here’s a link to a post where I explored 9 approaches to picking a retirement date.

Image Credit: Pixabay

6 thoughts on “Really BAD Financial Advice

  1. Saw the article. Also objected to it. Suze wanted to stir up controversy, boosting her personal profile, under the theory that there’s no bad publicity. She succeeded. The only good that may come of it is that some people who have done no planning anyway won’t throw caution to the wind. Yet I doubt those people read Suze anyway

    Liked by 1 person

  2. Hear, hear! Suze has clearly lost touch with a broad American audience. I have been trying to guess if she is a victim of her own success (aka hedonic treadmill), if this is some evil plan for reintroduction (at least, on her publicist’s part) or if she is just shooting off her mouth, taking a page from current politics. Time will tell if she flames out in some way or is back for some time, but I can’t imagine her words attracting a large audience: those who know her will be turned off, and those who need help won’t want just a doomsayer.

    Liked by 1 person

    • If they asked me to go on The Today Show and discuss her comments, I would question why people believe a 67 year old that is still working. 😉

      Liked by 1 person

      • Thanks for the link! Suze is trying to set things right, but still doesn’t get it I’m afraid. She’s trying to make it seem like everyone else is wrong – and that’s why she ‘misunderstood’ – when clearly she is still out of touch.

        Like

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