Imagine losing thousands of dollars in retirement income just because of one hasty decision. That’s the stark warning from Suze Orman, a financial guru with nearly 40 years of experience. Orman, a New York Times best-selling author and podcaster, is sounding the alarm on critical mistakes that could derail your golden years.
According to Kiplinger, Orman identifies claiming Social Security benefits before full retirement age and ignoring Roth conversion options as two of the biggest blunders pre-retirees and retirees make.
Let’s start with Social Security, a lifeline for many Americans. Orman calls early, claiming—filing before full retirement age, which is 67 for those born after 1960—“one of the biggest mistakes you could possibly make.”
The numbers are eye-opening. Claiming at 62 nets a maximum monthly benefit of $2,831 in 2025, but waiting until 66 or 67 boosts it to $4,018. Delay further to 70, and you’re looking at $5,108 per month. That’s an 8% annual increase for each year you wait past full retirement age up to 70. “You’re passing up an 8% increase each year,” Orman emphasizes. Where else can you lock in that kind of guaranteed return?
Yet, fear drives many to claim early. With the Old-Age and Survivors Insurance Trust Fund projected to become insolvent by early 2033, panic sets in. If no action is taken, benefits could be slashed by 23%, leaving recipients with just 77% of their expected payout.
“Everybody thinks Social Security isn’t going to be there,” Orman notes. This skepticism, while understandable for those wary of government promises, often leads to costly decisions. Early claiming might make sense for those with serious illnesses or dire financial needs, but for others, it’s a gamble.
Retirement can stretch over 20 years or more, and Orman warns it’s often pricier than expected. “They find out it's a lot more expensive,” she says. Inflation and sustained spending can erode savings fast.
Early claimants risk depleting their nest eggs while locked into lower payments. This forces tough choices—cutting back on lifestyle or even returning to work. It’s a trap that frugal, liberty-minded savers should avoid at all costs.
Orman’s second red flag is ignoring Roth conversion options like Roth 401(k), 403(b), or Roth IRA. Traditional retirement accounts, funded with pre-tax dollars, promise a tax break now but can hit hard later. Required Minimum Distributions (RMDs) kick in at 73, taxing withdrawals as ordinary income.
Worse, non-spousal heirs must withdraw inherited funds within 10 years, facing a hefty tax bill. “You don’t want to be partners with Uncle Sam,” Orman cautions. Roth conversions, though taxable upfront, can shield your wealth from future government grabs.
Converting means paying taxes now, so Orman advises consulting a financial adviser or tax professional. But the payoff? Tax-free growth and no RMDs for your heirs—a way to keep more of your hard-earned money.
Orman also flags other missteps, like living beyond your means. “You have to live below your means,” she insists. Overspending now can cripple your future freedom.
Then there’s the trap of life insurance annuities peddled at retirement seminars. Buying into these often locks you into bad deals. Orman warns against assuming perpetual income without saving—don’t bet on always having a paycheck.
For action, start by reviewing your Social Security timeline—can you delay claiming? Explore Roth conversions to cut future tax burdens, and always prioritize frugality. Build wealth now to secure liberty later, because in retirement, every dollar counts.