Suze Orman regularly gives financial advice to those who write on her podcast, “Women & Money.” Recently, 54-year-old Kim reached out about how to make the most of her $12,000 in savings.
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Kim revealed that she has no retirement plans or investment assets. The only money she has saved is that $12,000. Her employer offers a 401(k), but they don’t match it, so she hasn’t started one. The only debt she has is $4,000 left on a car loan. “I want to create the most security for my future, especially at my age,” Kim wrote.
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Orman immediately advised against starting the employer 401(k). “Given the fact that your company doesn't match the 401(k), I don't want you putting a dime into their 401(k). Useless.”
From there, Orman outlines three things Kim should do to maximize her savings. First, Orman tells Kim to put $8,000 into a Roth IRA. She recommends putting it in a money market account, which yields about 4%.
In 2024, the contribution limit for Roth IRAs is $8,000 if you are 50 or older ($7,000 if you are under 50). The upside to this strategy is that Kim can still access her contributions tax- and penalty-free, as long as she doesn’t touch the income from those contributions.
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The second piece of advice Orman gives Kim is to open an Ultimate Opportunity Savings Account at Alliant Credit Union. “I would put $100 in there every month,” Orman says. “It earns 3.1 percent interest. Again, if you need it, you can withdraw it at any time, but it earns 3.1 percent interest. But at the end of that 12 months, you'll get $100.”
The last thing Orman talked about was Kim's car loan. She advised Kim to pay it off quickly with everything she had left. The less Kim has to spend, the more she can save and spend on securing her financial future.
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Kim isn’t alone in this situation. According to an AARP survey, 20% of Americans 50 and older have no retirement savings. And 61% of this demographic worries about not having enough money to support themselves in retirement.
“America is facing a serious retirement crisis. AARP has a long history of supporting legislation to expand access to retirement savings. Yet Congress must act faster to provide the financial support that older Americans need and deserve,” said Nancy LeaMond, AARP Executive Vice President and Chief Advocacy & Engagement Officer.
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This article 54-Year-Old Woman With No 401(k) and Only $12,000 in Savings Asks Suze Orman for Advice, Orman Says 'Put $8,000 in a Roth IRA' originally appeared on Benzinga.com
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