ETFs
Suze Orman Tells 35-Year-Old Man: ‘You’re Too Young to Have Money in CDs’ and Should Focus on ETFs
Suze Orman Tells 35-Year-Old Man: ‘You’re Too Young to Have Money in CDs’ and Should Focus on ETFs
In a recent episode of her podcast “Women & Money,” the personal finance expert Suze Orman provided critical advice to Brett, a 35-year-old caller. Brett, who earns $93,000 a year with no debt, was concerned about his retirement savings and was looking for advice on how to improve his financial strategy.
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He explained that he maxes out his Roth IRA each year, with $14,000 currently in CDs, and contributes 5% of his income to a Roth TSP, matched by his employer, and invested in Lifecycle funds, for a total of $54,000. Brett asked Orman if he should contribute more or diversify his investments, especially as he sees his peers with substantial investments Pension saving and feels inadequate in comparison.
Orman’s first piece of advice was to stop comparing yourself to others. “The first thing you should do, Brett, is stop comparing yourself to others. What other people have, or pretend to have, doesn’t matter,” she said. “You just need to have the amount of money that will support you in retirement, your family or whatever.”
She pointed out the mistake of investing in CDs at a young age, especially in a Roth account. “You’re too young to have money in certificates of deposit, especially in a Roth account at age 35. You need to be looking for growth with ETFs and individual stocks,” Orman advised.
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To illustrate this missed opportunity, Orman pointed out that if Brett continued to invest $8,000 a year in CDs with a 5% yield, he would have $600,000 after 30 years. However, if he invested the same amount in the market with ETFs with a 10% yield, he could accumulate $1.7 million, or $1.1 million more. She added: “If you work until you’re 70, you could have $2.8 million. Now, that’s just your Roth IRA. At 5%, all you’d have is essentially $850,000. So what is it, Brett? Do you want $850,000 at 70 or $2.8 million?”
Orman also advised Brett to ditch life-cycle funds, which she said limit growth potential. “I don’t like life-cycle funds. I don’t like target-date mutual funds. Look for index funds “And manage your money by investing it so that it grows at that age,” she recommended. That strategy, she suggested, could easily yield $7 million or $8 million by retirement.
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Orman encouraged Brett to invest more, but criticized his current investment choices rather than the amount he had saved. “How are you doing right now? I’d give you maybe a C-, not because of how much you’re saving, but because of how you’re investing it.”
Orman’s advice emphasizes the importance of growth-oriented investments for young professionals. By avoiding conservative options like CDs and life-cycle funds and focusing on ETFs and individual stocks, Orman firmly believes Brett can significantly improve his retirement savings.
Whatever your choice, it’s important to prioritize personal financial goals over comparisons and adopt strategies that maximize growth potential. For personalized advice tailored to your specific situation, consult a Financial Advisor can be a valuable aid in ensuring that your investments are aligned with your long-term goals.
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