Suze Orman says you should be putting 'every single cent' into a Roth retirement account — if not, you are making a mistake

Benzinga explains the benefits of Roth retirement accounts and the differences between products.

Jeannine Mancini

Suze Orman points at camera wearing white shirt under black sweater at an event on September 17, 2018 in New York City.

Jim Spellman // WireImage

Suze Orman, a well-known financial advisor and author, is a strong advocate for Roth retirement accounts, including Roth 401(k)s and Roth IRAs. According to Orman, these accounts provide substantial benefits over traditional retirement savings options due to their unique tax advantages and flexibility. 

Suze Orman advocates for Roth retirement accounts, as highlighted in her book, "The Ultimate Retirement Guide For 50 Plus." She emphasizes the benefits of Roth accounts, "In my opinion, you should absolutely be putting every single cent into the Roth version of your retirement account." The Roth accounts give tax benefits, where contributions grow tax-free, and withdrawals are also not taxed. This enhances the retirement fund relative to traditional taxed accounts. 

Benzinga reports that Orman points out the uncertainty of future federal income tax rates. On her website, she cautions, "If you are not saving for retirement in a Roth, I think there's a good chance you are making a mistake."

The benefits of Roth accounts extend beyond their favorable tax treatment. Orman points out their flexibility, especially in estate planning and inheritance strategies. "If you're planning to leave retirement savings as an inheritance, a Roth 401(k) is better here, too," Orman explains. The heirs can inherit Roth accounts without the burden of income taxes, which can be a significant advantage if they are in a higher tax bracket.

Despite the clear advantages, not everyone has access to a Roth 401(k) through their employer. In these cases, Orman recommends the Roth IRA as an alternative. The Roth IRA offers similar benefits to the Roth 401(k), but with income limits for eligibility. 

Moreover, Orman advises those with access to employer-sponsored retirement plans to make the most of them. "If you have a retirement account at work that matches your contribution, invest up to the point of the match. After that, fully fund your Roth IRA," she suggests. This allows individuals to benefit from employer contributions and the tax advantages of Roth IRAs.

Orman values the flexibility of no-penalty withdrawals from Roth IRAs. Contributors can withdraw their contributions (but not earnings) at any time without penalty, irrespective of their age or the duration of funds. This feature is particularly appealing to those who may need access to their funds before retirement due to unforeseen circumstances.

Overall, Orman's recommendation to prioritize Roth accounts when planning for retirement reflects her strategic approach to maximizing financial security. By understanding the distinct benefits of Roth 401(k)s and Roth IRAs, individuals can make informed decisions that enhance their financial well-being in retirement while also providing flexible options for their heirs.

While Orman's advice is generally sound, it's important to consult with a financial advisor to determine the best retirement savings strategy for your circumstances. A financial advisor can consider your tax bracket, risk tolerance, and retirement goals to create a personalized plan.

This story was produced by Benzinga and reviewed and distributed by Stacker Media.