Most working Americans recognize that Social Security and 401(k) plans will play a critical role in providing financial support for their daily needs during retirement.
Suze Orman, the well-known personal finance author, emphasizes the importance of understanding specific retirement planning details to ensure a secure future.
And she has a major warning for Americans about Social Security and 401(k) mistakes to avoid.
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The average monthly Social Security benefit, roughly $1,900, is not designed to fully support a retiree’s ideal lifestyle on its own. That monthly amount works out to about $23,000 annually, only slightly more than the 2025 U.S. poverty line of $21,150.
Many employees benefit from employer-sponsored 401(k) plans and also build additional savings using investing tools such as tax-advantaged IRAs (Individual Retirement Accounts).
Related: Scott Galloway sends strong message on Social Security
In 2025, workers who participate in 401(k) plans have an annual contribution limit of $23,500, up from $23,000 in 2024. For those 50 years of age and older an additional $7,500 can be added, for a total annual limit of $31,000.
The annual contribution limit for IRAs remains the same at $7,000. People more than 50 years old can add $1,000, for an annual limit of $8,000.
Recognizing these and other financial challenges tied to saving and investing for retirement, Orman provides a caution to help people navigate these complex money matters.
Suze Orman warns Americans about receiving Social Security benefits early
American workers have the option to begin collecting Social Security retirement benefits at age 62. However, to receive the full amount of their benefits, they have to wait until they reach their designated full retirement age, which is 67 for people born in 1960 or later.
Those who choose to postpone claiming benefits beyond their full retirement age, up until the age of 70, will see their monthly payments increase.
And Orman minces no words when giving advice on this topic.
More on retirement:
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“If you take Social Security at 62 or before your full retirement age, in my opinion, you are making the biggest mistake out there because you’re not compounding it,” she told TheStreet in an exclusive interview. “You’re not letting it grow. You need to just let it be.”Â
“And for those of you who can, you should wait till you are 70,” Orman continued. “Now, those ages may change, but if you’re currently about to retire or thinking about it, full retirement age minimum or at least 70. If you can.”
Related: Dave Ramsey has blunt words on 401(k)s, Roth IRAs now
Suze Orman has blunt words on a 401(k) mistake people make
Regarding 401(k) plans, Orman offers an important tip.
“If you have a 401(k), great. Especially if your employer matches. But if you don’t have a Roth 401(k) and you are contributing simply to a traditional 401(k), which is pre-tax, you are making the biggest mistake ever,” she said. “You need to go Roth all the way.”Â
Contributions to a Roth 401(k) are made after taxes, so withdrawals in retirement are tax-free.
“So the biggest mistake you will be making is getting a tax write off now for your contributions to your retirement account and seriously pay for it later on,” Orman added. Big, big mistake.”
Orman also discusses the fact that people can continue to work to add to their income in retirement.
“A lot of people think that retirement is simply you need money in order to pay your bills. That’s not what’s happening here,” she said. “When you retire, working gives you validation of who you are.”Â
Orman believes people make a mistake by viewing their retirement savings as the only source of money they will have.
“They don’t understand that retirement is a whole lot more than that,” she said. “You actually spend more money in retirement than you did when you were working, because when you’re retired, you eat out more. You go to see your kids more, you want to take more vacations.”
“So I don’t think they quite estimate everything the way that they should.”
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