Suze Orman told a woman she'd get a 'D-minus' on retiring at 55 — then showed her how to turn it into an 'A'
Suze Orman told a woman she'd get a 'D-minus' on retiring at 55 — then showed her how to turn it into an 'A'.
Megan, a 48-year-old single mother, is hoping to retire at 55 — driven, in part, by her father's death.
"My dad passed away at 66, just two months shy of retirement, and I've made it my goal to call it a day at 55," she told (1) Suze Orman on her show How Am I Doing?
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In terms of retirement readiness, Megan gives herself a grade of B-minus. While she thinks she could be saving a bit more, she also thinks she's "so close that the return on the money wouldn't be that much."
But walking through the numbers, Orman comes up with a different conclusion. And a different grade: a D-minus. Still, Orman says there's a way Megan can earn an A — and it doesn't require much effort on her part.
Planning when to retire is a conundrum for many Americans. The traditional retirement age is widely considered to be 65 (and the government defines it as 66 or 67, depending on your year of birth), but it's an arbitrary number.
Not everyone wants to retire at 65 — and many end up retiring much earlier (sometimes by choice, sometimes not).
The average American retires around age 62, according to a survey (2) from the Transamerica Center for Retirement Studies. Only 14% of retirees say they actually retired at 65, while one in three (31%) retired past the age of 65 — including 8% who don't intend to stop working.
But to earn an A on retirement readiness, it's worth considering Orman's advice to Megan.
Determining when to retire can be a tough decision. After all, you don't want to prematurely drain your retirement savings. But some people, like Megan, might be underestimating their future returns.
The earlier you start saving, and the longer you save, the more you're able to benefit from compound interest. This means you're earning returns on both your principal and the interest you've accumulated over the years, which has a snowball effect on your savings.
Retiring early means you could miss out on your peak earning years, as well as the ability to make catch-up contributions to your retirement accounts, which could boost your savings even further.
If you're 50+, you can make a catch-up contribution of $8,000 to your 401(k) or 403(b) in 2026. And if you're aged 60 to 63, you can contribute an extra $11,250. You can also contribute an extra $1,100 to your IRA (traditional or Roth) on top of the $7,500 annual limit (3).
If you retire early, you'll also have to pay for private health insurance before Medicare kicks in at age 65. With an average U.S. lifespan of 79 years (76.5 years for men and 81.4 years for women (4)), early retirement means you might need to stretch your savings over 30 years or more.
So far, Megan has $864,000 in retirement savings, $344,000 in investments and $23,000 in an emergency fund. Her home is worth $285,000 and she has $92,000 left to pay on her mortgage. She's almost paid off her car, with about $1,500 left on her car loan.
That gives her a net worth of about $1.4 million. But, after crunching the numbers, Orman would give Megan a D-minus on retirement readiness — that is, if Megan wants to retire at 55.
