Suze Orman is a bestselling author, a television and podcast host, and has taught millions of people about money.
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One of her favorite money topics is retirement, so here are some of her best saving and investing tips for retirees.
Wait Until Age 70 To Collect Social Security
Orman is adamant that waiting as long as possible — to age 70 if you can — is the best way to maximize your Social Security benefit.
Your Social Security benefit is calculated at your full retirement age, or FRA. For those born in 1960 or later, your FRA is 67. If you claim at age 62, you’ll get 70% of your FRA benefit. If you wait until age 70, you’ll get 124% of your FRA, according to the Social Security Administration. Once you begin receiving benefits, your benefit amount is set and only increases by an annual cost-of-living adjustment.
To those who say they don’t know what the future holds for Social Security, Orman notes these facts.
Much has been made about Social Security “running out of money,” but that’s not what will happen. Even if Social Security stops collecting enough from current workers to pay 100% of benefits, as is expected to happen in 2034 if Congress doesn’t act, benefits won’t stop completely. Instead, benefits would be cut, by as much as 25%. But you’ll still get 75% of your benefit.
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In 1983, changes were made to Social Security in response to a looming shortfall, similar to what we’re seeing today. One of them was raising the full retirement age, but it didn’t affect anyone who was already retired.
If your health is good, waiting to collect makes good financial sense. Orman said that the break-even point, at which you’ll collect more total dollars by waiting until age 70 to begin versus starting at 62, is about 81. After that age, you’ll collect more if you start at 70 than you will if you started at 62.
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When one spouse dies, the surviving spouse gets the larger of the two benefits. So it’s important for that benefit to be as large as possible.
You can claim any time between age 62 and age 70, and every month you delay increases your benefit.
Work Longer
By working longer — even part time — you can put off collecting Social Security and get a larger check when you do start receiving benefits. Orman recommends eating well and exercising to stay healthy longer, keeping your skills up to date to avoid being downsized, or starting a side hustle that you can continue into retirement.
Tap the Equity in Your Home by Downsizing
Orman is a big fan of not having a mortgage payment in retirement. But what if you still have several more years of payments to make, and don’t have the cash to pay it off? Selling your home and buying a smaller one can help you sail into retirement with no mortgage payment. And a bonus to this strategy is that you can choose your new home based on your retirement lifestyle, whether that means moving to a warmer climate or switching to one-floor living.
Avoid the Temptation To Help Adult Children
This is something that Orman talks about a lot. While she understands that sometimes adult children need financial help, she also knows that sacrificing your own retirement savings to bail your kids out of a financial quandary is often a bad idea. She often speaks up about parents who cosign loans for their adult children, or who help out with rent in a high-priced city.
In a blog post on her website, Orman calls it as she sees it.
“If continuing to provide financial assistance to your kids is making it hard for you to get your finances in great shape — saving more for retirement, paying down your mortgage, eliminating credit card debt — you are actually making matters worse for your family,” Orman said. “Years from now, your adult kids will likely need to step in and help you. At a time when they are trying to raise their own family. If you help today, it can’t be at the cost of hurting you tomorrow.”
Investing in Retirement
Orman suggests continuing to keep a diversified portfolio in retirement, but she also recommends keeping one to two years’ worth of expenses in cash. That way, you won’t have to liquidate investments in a down market. She also recommends withdrawing no more than 3% to 4% of your savings annually.
Despite all the planning we do for retirement, the journey doesn’t always go exactly as we expect. But following these tips can help with those bumps in the road, and help you to enjoy the retirement you’ve dreamed of.
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This article originally appeared on GOBankingRates.com: Suze Orman’s 5 Best Saving and Investing Tips for Retirees