Suze Orman Hates Us

For those who don’t know, Suze Orman is a financial “guru” who writes lots of books and appears on TV. In a recent interview she rather harangued the FIRE community as being misguided and out of touch with reality . Her big takeaway was that you needed at least $5M or ideally $10M to retire.

Let’s take a look at this, as I think she is the one who is out of touch. Firstly I think she is right that a lot of people probably under estimate the cost of medical expenses in old age. A Fidelity report states that the average couple will need $280,000 after age 65 to cover medical, so maybe $10 – $20,000 a year. While this is a large amount I don’t think you need $10,000,000 to cover that annual amount.

If you have that $10M, let’s say you need that to cover 50 years. even if you put the money under your mattress then that is $200,000 a year. This would furnish a pretty good retirement! Of course inflation would play in as well, so the $200,000 a year will get eroded and probably be worth closer to $100,000 after 25 years or so. But still that’s a pretty healthy amount of money.

If you put that $10M in a government secured bond or T-Bill and got 1% then you could leave the $10M for an inheritance and still be withdrawing $100,000 a year. That’s about as secure an investment as it’s possible to get (frankly if T-Bills and the US government collapses then there are bigger issues than your retirement, like the Zombie Apocalypse!)

The only possible way $10M would be a”normal” amount to early retire is if you are planning a lifestyle involving expensive cars, and foreign travel. Realistically that is not the lifestyle FIRE families and couples are signing up for.

Of course you need to be practical about this, I think most FIRE bloggers and commentators probably are in the $2-3M range. Five million would be in the upper range.

It’s important that financial experts in the public don’t give people false information and don’t underestimate the effort required to get the amount of money required. But at the same time the should have a responsibility to not be over cautious, and to allow people to pursue their goals.

 

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