At age 49, retirement can look far away.
However, if the paychecks cease coming in, a monthly deficit that is initially modest enough to be ignored might become much more difficult to resolve.
Recently, Suze Orman examined the finances of Michele, a 49-year-old single mother who intended to retire at age 67.
She was not on track, according to the data.
Orman estimated Michele’s available income at about $2,650 per month after taxes, but Michele said she would need nearly $4,000 per month in retirement. That leaves a monthly shortfall of almost $1,400.
Orman had a direct response: Working until age 67 may not be sufficient. She suggested deferring Social Security, continuing to save, and delaying retirement until age 70.
The example is significant because it demonstrates how retirement planning shifts when the inquiry shifts from “How much have I saved?” to a much more useful one: After I quit my job, how much money would I really make each month?
Suze Orman’s official YouTube channel featured the case in “She’s 49 and Starting From Scratch. Is It Too Late to Retire?”
Suze Orman focuses on the $1,400 monthly gap
Michele’s financial situation was not dire.
She had about $29,000 in a retirement account, $3,700 in emergency savings, and another $3,200 invested. She also owed almost $20,000 on consumer debt.
With a monthly take-home salary of around $2,900 and monthly expenditures of about $2,300, she had about $549 left over.
Time was the issue. Compared to someone starting in their 20s or 30s, Michele has fewer years remaining to compound fresh investments at age 49.
According to Orman’s calculations, retiring at age 67 may leave her approximately $1,400 short of what she anticipates needing each month.
That amounts to almost $16,800 annually.
That same yearly difference would add up to $336,000 over a 20-year retirement, even before accounting for inflation, investment returns, and changes in consumption.
This does not imply that Michele really needs an additional $336,000 today. It shows how, over many decades, a monthly retirement deficit may grow into a six-figure issue.
Working until age 70 changes more than one number
Orman’s suggestion to put in three more years of effort tackles the issue from many angles simultaneously.
If Michele receives earned income for an additional three years, she has three more years to contribute to her retirement and gives her current investments more time to increase in value.
Crucially, postponing Social Security beyond full retirement age may raise the monthly amount indefinitely.
For people born in 1943 or later, the Social Security Administration says benefits generally increase by 8% for each year they are delayed after full retirement age, up to age 70.
Waiting until age 70 may consequently increase the payout by around 24% before future cost-of-living increases for someone whose full retirement age is 67.
Delaying retirement is thus a potent tool.
It’s also a challenging one. Working until 70 is predicated on a person’s continued health, ability to maintain employment, and willingness to put off any long-planned retirement.
These presumptions don’t apply to everyone.
Because of this, the lesson from Orman’s example is not only to “work longer,” but also to find a retirement income gap early enough to have many options for closing it.
Orman gives the 49-year-old a savings plan
Orman also advised Michele to boost her retirement funds once she hits 50.
She recommended reorganizing some current retirement funds and investing around $541 per month in a Roth individual retirement account.
Money that has previously been taxed is used to fund a Roth IRA. In retirement, qualified withdrawals are often tax-free.
For 2026, the Internal Revenue Service allows people age 50 and older to contribute as much as $8,600 across traditional and Roth IRAs, subject to income and other eligibility rules.
Orman’s suggested monthly contribution of $541 would come to almost $6,492 annually.
For someone who presently earns $2,900 a month, it is noteworthy. It also illustrates the compromise Michele must make.
Retirement catch-up does not take place in isolation from the rest of a family’s budget. Every extra dollar for retirement must come from somewhere, whether it’s decreased expenditures or funds that would otherwise be used for another purpose.
Orman also suggested conserving the money now being used for the car payment once that obligation expires to reduce consumer debt and prevent another auto loan.
The goal of such adjustments is to increase the amount of money available each month for retirement.
Suze Orman’s retirement warning comes down to $1,400 a month.
The number that matters may not be your retirement account balance
Retirement savings sometimes concentrate on the 401(k) or IRA’s headline balance.
It sounds better to have a $500,000 portfolio than a $250,000 one. Even better is a $1 million portfolio.
However, such figures alone cannot determine a person’s ability to retire.
A family that spends $4,000 a month has somewhat different challenges than one that spends $8,000. And the amount of savings a person really needs might vary depending on housing prices, debt, taxes, health care, and Social Security income.
More Retirement:
- 20 million Medicare beneficiaries may get a one-time $90 payment
- Vanguard spotlights Roth IRA trap hiding in your income
- Dave Ramsey raises a $185K risk Fidelity pegs for retirees
For this reason, one could argue that Michele’s $1,400 gap is more valuable than her account balance. It establishes a clear link between her funds and the lifestyle she anticipates them supporting.
Anyone who is getting close to retirement may benefit from the same calculation. Add up how much you anticipate earning each month from assets, pensions, and Social Security. Next, contrast it with reasonable monthly spending.
The number that has to be bridged is the difference.
Waiting 3 more years to retire is powerful but isn’t a guaranteed fix
There is one significant flaw in Orman’s proposal.
Michele’s ability to continue working until she is 70 is key, yet may be more difficult than it seems. Workers may have to retire earlier than anticipated due to layoffs, illness, caregiving responsibilities, and other unforeseen circumstances.
TheStreet has previously highlighted the danger of assuming extra working years will automatically rescue an underfunded retirement. Because of this, the years leading up to retirement are crucial.
If a person finds a $1,400 monthly difference at age 49, they still have time to modify their spending, savings, and retirement plans. Yet there are fewer alternatives when the same gap is found at age 66.
Orman responded to Michele by adding three years. Increased savings, reduced retirement expenditures, a delayed Social Security claim, or a mix of the three might be the answer for other workers.
The age at which a person plans to retire is not always the crucial figure. The question is whether the money that will be available to them at that age will be sufficient to cover their expenses.
Related: Suze Orman says the biggest retirement asset hides a trap
