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You're making a rookie mistake. That type of analysis, that goes far out into the future, can produce very different results with small changes in assumptions. Change the delta between your rate of return and the inflation rate, for example, and you could get a very different result.
That's why you need to build in a cushion.
Having said that, keep in mind that Suzy's advice is for people who would never save on their own, and therefore depend on a payroll deduction to save. That's a part of why she always pushes retirement savings as opposed to other types of savings. She knows her audience would never have the discipline to build assets outside of a payroll deduction.
I think it's more important to look at the larger picture. At your age, all your excess cash should NOT be going into retirement accounts that have penalties if you want to remove the money. You need to think of broader life needs, and it should be a goal to have a paid-off home to live in for your retirement years. So by all means lower your retirement savings amount if you're going to use the money productively in other ways (and not to, say, buy a more expensive car or take vacations).
I don't really have that much money in retirement accounts (only a few hundred thousand dollars), but I have a lot of other money outside retirement accounts, on which the taxes have already been paid, and that suits me just fine. It's the total picture that matters, but I think Suze knows her audience is too unsophisticated and short-sighted to handle that.
Okay.....so you're saying Suze's advice (15%) is not a good fit for me. Now, you're saying the retirement calculator on Fidelity isn't accurate either (8%). So then, what would be the best guideline for me? This crap is so confusing and difficult.
Okay.....so you're saying Suze's advice (15%) is not a good fit for me. Now, you're saying the retirement calculator on Fidelity isn't accurate either (8%). So then, what would be the best guideline for me? This crap is so confusing and difficult.
There's nothing in particular wrong with the Fidelity calculator. You just can't assume that the results are accurate to the dollar, and that you won't need a penny more. I wouldn't recommend lowering your overall savings rate now because the Fidelity calculator says you'll have more than you need.
I think Suze's overall 15% savings recommendation is reasonable. I just don't think it should all be directed to retirement at this stage of your life.
There's nothing in particular wrong with the Fidelity calculator. You just can't assume that the results are accurate to the dollar, and that you won't need a penny more. I wouldn't recommend lowering your overall savings rate now because the Fidelity calculator says you'll have more than you need.
I think Suze's overall 15% savings recommendation is reasonable. I just don't think it should all be directed to retirement at this stage of your life.
Okay...well Suze said that for people under the age of 40, should be contributing 15% of our salaries to retirement. Then, after that, she said to fine tune it. She said while you're under 40 years old, don't worry about fine tuning and projecting income, and just focus on saving and taking advantage of the time value of money and compounding. That's why I followed her advice.
But then, your comment in bold suggest that 15% is too much. You're inconsistent.
Nobody has all the answers, but there are some people who can't boil water without some sort of instructions, so providing guidelines may in that sense be helpful. Still, these percentages are actually targets that are only going to be met by those who can actually afford them. A person who can't possibly save 15% of income is a risk to just throw up his or her hands in frustration and walk away from trying to save anything at all. That's not good. Particularly in one's 20's and 30's, the important thing is simply to be regularly saving something. It doesn't matter how small it is. Start as small as you need to with all the other bills that need to be paid, but start. Work your way up as finances become a little easier. For many people, saving 15% of income will never be possible, but almost anyone with a median income or better can accumulate over time savings that will be significant in retirement so long as they don't in the meantime get eaten up by another idiotic laissez-faire free-market financial collapse.
I don't know much about insurance and living trusts, but I do think most of Suze's advice is practical.
Why? You have to understand her audience.
One of the reasons this last recession was so disastrous is that so many people are living way beyond their means. I can't tell you how many people I see getting married and needing to buy a house immediately! They can't wait! They buy too much house, and then if one of them loses their job they are in big trouble.
Yes, the banks and Wall Street are too blame for much of the financial crisis. Greed, greed, greed. They let people buy houses they really had no business buying and now many of these houses are underwater. But these homeowners must take some of the responsibility for this.
Also, too many people are getting in too much debt for college. I have no problem with someone majoring in whatever they want, but to get into six-figure debt is ridiculous, unless you are going to medical school.
People are eating out too much (and our waistlines and bank accounts reflect this), and they are wasting their precious money on too many power tools, shoes, etc. No one always needs to buy the latest gadget. And the children today are showered with toys, designer clothes, and too much technology.
I always like it when couples in financial crisis come on the show and swear up and down they have cut their budget to the bone and it turns out they are wasting hundreds of dollars a month on booze, cigarettes, eating out, etc.
Americans are TERRIBLE savers. They spend a lot of money on unnecessary "wants" and not on "needs". Just watch the "Can I Afford it?" segment. Look how ridiculous some of the "wants" are:
She actually was on again about a year later still longing to go to "elf school."
This guy must have been kidding! He makes $72,000 a year and wants to buy a $120,000 car!
I think I'm going to stop following Suze's advice. It just doesn't quite fit me precisely enough. Therefore, I'm going to scale back my emergency fund down to 3 months of liquid cash, because in addition to that, I have a credit card and $37,000 in stocks that could be sold. So those things would add months on top of the 3 months of cash. And since I'm not self-employed, I'm likely to receive unemployment, which would cover 70% of my expenses. Parents would help too, if they had to.
Then, I'm going to down-adjust my retirement contributions from 15% to 8%, which is projected to grow to $2.4M upon retirement anyway, which is plenty. I never plan on having kids, and probably will never get married.
Instead of getting a trust or will, I'm simply going to designate beneficiaries for my estate assets. It's pretty simple and avoids probate.
These changes will immediately free up about $1,100 a month to do whatever I want with it!!! I will probably save 100% of it toward a fund to make a down payment on a house.
Nobody has all the answers, but there are some people who can't boil water without some sort of instructions, so providing guidelines may in that sense be helpful. Still, these percentages are actually targets that are only going to be met by those who can actually afford them. A person who can't possibly save 15% of income is a risk to just throw up his or her hands in frustration and walk away from trying to save anything at all. That's not good. Particularly in one's 20's and 30's, the important thing is simply to be regularly saving something. It doesn't matter how small it is. Start as small as you need to with all the other bills that need to be paid, but start. Work your way up as finances become a little easier. For many people, saving 15% of income will never be possible, but almost anyone with a median income or better can accumulate over time savings that will be significant in retirement so long as they don't in the meantime get eaten up by another idiotic laissez-faire free-market financial collapse.
I'd say most people can save 15% of income. I have no facts to back this up but just my personal outlook. Let's say the average household makes $50,000. So about half the people make less than $50,000 and they can survive. So if they can survive, anyone making over $50,000 can "imagine" themselves making 15% less and surviving on that. I say this because that's the way I always thought, if I make $50,000, many people out there are making $42,750 and if they can get by on that, I can get by on that. Fortunate people making $100,000 can easily survive on $85,000 since there are many more households making only $85,000. It all comes down to priorities, if the latest IPAD and IPHONE and new car and big home is a priority, then saving 15% is impossible but that is a choice that the household has made.
I personally like Suze Orman. Her advice isn't in depth (duh) but I think she does a good job of reaching and talking to the everyday person. Folks who don't make 100k a year. Folks who don't have rich parents who paid their way in the past and are willing to do so in the future. The everyday person who is just live an okay life and have their cards in order financially.
No wonder the OP is having issues with Suze...you're not what her show is aimed for. You're not worried about an emergency fund or anything for real...because if it comes down to it you have you parents and the wealth that is and will be passed along to you.
I personally like Suze Orman. Her advice isn't in depth (duh) but I think she does a good job of reaching and talking to the everyday person. Folks who don't make 100k a year. Folks who don't have rich parents who paid their way in the past and are willing to do so in the future. The everyday person who is just live an okay life and have their cards in order financially.
No wonder the OP is having issues with Suze...you're not what her show is aimed for. You're not worried about an emergency fund or anything for real...because if it comes down to it you have you parents and the wealth that is and will be passed along to you.
I really like her too, but like others have said, her advice isn't optimal for everybody. Her show is entertaining, informative and honestly, I have learned quite a bit from her, even though I make $75K. You can still learn some helpful pointers from her, or how various types of retirement accounts, estate plans or debt reduction techniques work, etc. But her solutions are blanketed as one size fits all, in many cases.
How about just "take what you like and leave the rest"? There are some things Suze says that are pretty good and some that aren't. Part of her show is typical "reality television" where you have callers or whoever she's lecturing who are more like stereotypes than "regular" people, and they're likely chosen specifically for that reason.
Learn what you can from her, then move on. Same with any other resource, be it Dave Ramsey or any of a dozen finance books or this website or other personal finance websites or Warren Buffett's annual letters to Berkshire shareholders or seminars from your local financial institution or those "free dinners" put on by financial advisors that are fishing for business or...well, any source. Some of them may have some information that's useful, much of it'll be chaff but the more you learn the easier it'll be to get the wheat. And of course, the more knowledge you'll build up for yourself.
You've already learned that Suze Orman is really more about getting non-savers/financial neophytes to change the way they think about money and change their behavior patterns. Her actual financial advice beyond that is limited and not terribly good, but again, look at the audience she's aiming at. If you've moved beyond that point, then investiagte other sources.
IOW, spend less time trying to "rank" Suze Orman's advice and determine if it's "bad" or "good", and instead keep gaining knowledge and thinking for yourself. That said, it seems like your main goal so far has been to convince yourself you can spend more and save less, which doesn't exactly bode well for the future but I've read far, far worse stories on the intermawebz over the years.
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