Suze Orman stands out as one of the most popular financial advisors in the United States. She has become the voice of reason for average Americans who want to maximize their financial potential.
Early in her career, Suze Orman learned some hard lessons about investing. As a young adult, she trusted Merrill Lynch representative to manage her investments. He lost all of her money quickly.
Baffled by the experience, she wanted to learn more about investing. Eventually, she ended up as an account executive at Merrill Lynch. There, she learned that the rep had invested her money in high-risk investments only suitable for people with high net worths. He had completely mismanaged her money.
That sparked an interest in smart money management. So these days what does she recommend as better investments for those who want to sidestep the financial turmoil she experienced?
How Did Suze Orman Get Started
Orman stayed with Merrill Lynch until 1983 when she left to join Prudential Bache Securities (now called Prudential Securities). She left her role as vice president of investments in 1987 to found her own firm, Suze Orman Financial Group.
Her career has grown rapidly since she formed her own business. She’s written at least 10 best-selling books about personal finance and investing. She’s appeared on numerous television shows, including Larry King Live and The Oprah Winfrey Show.
Her on-air popularity made it possible for her to start The Suze Orman Show and America’s Money Class With Suze Orman. She has written articles for countless publications, including O, The Oprah Magazine and The Philadelphia Inquirer.
Currently, Orman oversees SecureSave, a company she founded to help Americans boost their savings rates by encouraging employees to match their contributions.
What Does Suze Orman Say About the Stock Market?
Suze Orman says that stocks are among the best investment options because they consistently grow faster than inflation. Bonds and cash have suffered as the dollar loses its purchasing power.
She has rightly observed that the US dollar has lost 87% of that purchasing power since 1971. The dollar you had in 1971 is only worth about 13 cents today. Those who held on to that dollar as an investment vehicle have lost a lot of wealth over the last several decades. However, anyone who invested it in the stock market has enjoyed a massive increase in wealth.
Orman does caution people to understand their risk tolerance before investing in stocks. High-risk stocks often generate the highest returns… when they succeed.
By their nature, though, many of them fail. If you can’t afford to lose money on an investment, she believes it makes more sense to put your money in companies that have proven histories. You might not generate tremendous returns, but you can lower your risk and at least help your money stay ahead of inflation.
What Investments Does Suze Orman Recommend?
Suze Orman has said several times that it’s important for people to fund emergency savings accounts and pay off their debts to avoid interest. Once you reach those goals, start investing in stocks and exchange-traded funds (ETFs).
Real estate also makes a good investment option for some people. The high price of buying property, however, makes it impossible for the average investor. Still, practically anyone can afford to invest in a diverse stock portfolio.
Investments like bonds and CDs might have made sense at one time, but today’s high inflation and stagnant wages make the stock market an obvious choice.
What Stocks Does Suze Orman Recommend?
Suze Orman recommends dividend stocks above other types of equities because they pay out reliably.
She has stated that individuals should choose stocks that fit their financial realities and goals. Those are the most important considerations when buying shares.
She puts dividend stocks at the top of her list because they pay you to become an investor. Even when stock prices fall, many companies will pay out dividends to keep their shareholders happy.
There is an important caveat, though, which is to choose companies with histories of managing their money well. Don’t choose a stock just because it pays dividends. It’s important to research the company to learn about how it has performed historically, for example to make sure it’s not heavily indebted or has a very high dividend payout ratio.
Does Suze Orman Recommend Roth IRAs?
Suze Orman recommends opening Roth IRAs as early as possible. In fact, she encourages parents, grandparents, and other adults to start Roth IRAs for younger relatives. Once the young person starts earning money, the adult can match their contributions so the account’s balance grows faster.
Why does Orman like Roth IRAs so much? Because they grow over time tax-free.
On average, Roth IRAs earn a 7% return annually. If you commit just $2,500 per year for 50 years, you should have a million dollars waiting for you when you retire.
Ideally, Roth IRA owners will contribute larger amounts as they get older and start earning more money. Currently, people under 50 can contribute $7,000 a year. Those over 50 can contribute $8,000 to “catch up” on their investments.
Since Roth IRAs grow over time, it makes sense to start them as early as possible. Even a small amount has the potential to turn into a lot of money.
Imagine you use $1,000 to start a Roth IRA when you’re 18. If you keep adding $1,000 per year, you’ll have about $352,270 when you turn 65. If you wait a year and start the account when you’re 19, you’ll have about $328,224.
Because of compound interest, you earn an extra $24,000 because you started one year early. That’s a solid argument for opening an account as early as possible.
What Does Suze Orman Recommend for Retirement?
Suze Orman has some excellent insights into how people should prepare for retirement. Her tips include:
- Investing in retirement accounts as soon as possible
- Taking advantage of employer matching to maximize retirement investments
- Eliminating all debt before leaving your job
- Waiting until 70 to start taking Social Security
- Considering the possibility that you could live much longer than you think
While without can ensure that you’ll have enough money to retire when you want, following her advice sets you up for success.
What Are the Four Documents Suze Orman Says You Must Have?
Orman has said on several occasions that people must have four documents:
- Revocable trust
- Financial power of attorney
- Durable power of attorney for healthcare
A will defines how your assets will get distributed after your death. You can use it to appoint beneficiaries and an executor who oversees the distribution.
A revocable trust ensures that your money and assets get used according to your wishes as you age. You can update the trust’s terms at any time, which makes it “revocable.” The trust can also establish beneficiaries who will receive assets after your death. Unlike wills, revocable trusts can usually avoid probate court. That doesn’t mean you should avoid getting a will, though. Both legal documents can play important roles as you age and after your death.
Financial power of attorney gives a trusted person the power to manage your accounts and assets while you’re alive. It’s especially useful when you have an accident, get sick, or for some other reason can’t manage your own finances. It’s important to choose someone you trust without any doubts because that person usually holds power of attorney until your death.
A durable power of attorney for healthcare designates a trusted person to make healthcare decisions for you when you’re unable to do so. For example, the person might manage your healthcare following a stroke that leaves you incapacitated. The attorney-in-fact should understand your healthcare wishes and beliefs so they can make the same decisions you would.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.