Suze Orman Tells 35-Year-Old 'You Are Too Young To Have Any Money In CDs' And Should Be Focusing On ETFs

In a recent episode of her "Women & Money" podcast, personal finance expert Suze Orman offered critical advice to Brett, a 35-year-old caller. Brett, who earns $93,000 annually with no debt, was concerned about his retirement savings and sought guidance on improving his financial strategy. 

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He explained that he maxes out his Roth IRA annually, 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, totaling $54,000. Brett asked Orman if he should contribute more or diversify his investments, especially since he sees his peers with substantial retirement savings and feels inadequate in comparison.

Orman's first piece of advice was to stop comparing himself to others. "The first thing you should do, Brett, is stop comparing yourself to other people. What others have, or claim to have, does not matter," she said. "You only need to have the amount of money that makes you secure so that you can support yourself in retirement, your family, or whatever."

She highlighted the mistake of investing in CDs at a young age, especially within a Roth account. "You are too young to have any money in certificates of deposit, especially in a Roth account at the age of 35. You need to be going for growth with ETFs and individual stocks," Orman advised. 

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To illustrate the missed opportunity, Orman pointed out that if Brett continued investing $8,000 a year in CDs at a 5% return, he would have $600,000 after 30 years. However, if he invested the same amount in the market with ETFs at a 10% return, he could accumulate $1.7 million, which is $1.1 million more. She added, "If you work till you are 70, you could have $2.8 million. Now, that is just your Roth IRA. At 5%, all you would have is essentially $850,000. So, what is it, Brett? You want $850,000 at the age of 70 or $2.8 million?"

Orman also advised Brett to ditch life cycle funds, which she believes 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, investing it for growth at this age," she recommended. This strategy, she suggested, could easily yield $7 or $8 million by retirement. 

Orman encouraged Brett to contribute more but critiqued his current investment choices rather than the amount he saved. "How are you doing right now? I would give you maybe a C- and not because of the amount you're saving, but because of how you are investing it."

Orman’s advice underscores 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 enhance his retirement savings. 

No matter what you choose, 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, consulting a financial advisor can be invaluable in ensuring your investments align with your long-term objectives.

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