Suze Orman's 4-step retirement plan for Gen Z: save 15% now

Personal finance expert Suze Orman is urging 20-somethings to save 15 percent of their income in retirement accounts, recommending Roth IRAs as the primary vehicle for young savers who want tax-free withdrawals in retirement.

"When you live below your means, you will always have money you can put toward long-term goals, such as retirement," Orman said in a Facebook post. "By living within your means today, you are effectively reducing the lifestyle you will need to support in retirement."

Orman's framework spans four steps: set a 15 percent savings rate, open a Roth IRA, automate contributions, and plan for a retirement lasting to at least age 95. She argues that compound interest makes early contributions disproportionately valuable — even small amounts invested from a 20-something's paycheck can grow into significant wealth by retirement age. On account selection, Orman prefers Roth IRAs because contributions are taxed upfront, making withdrawals tax-free later. Traditional IRAs defer taxes to withdrawal, which can push retirees into higher tax brackets and increase Medicare premiums, which are calculated based on taxable income.

The stakes are substantial. Americans now live 25 to 30 years or more past retirement, and Orman recommends planning for a lifespan of at least 95 years — up to 100 for those with long-lived families. She advises delaying Social Security benefits until age 70 to capture the higher monthly benefit, and keeping a portion of investments in stocks, which historically yield more than bonds over long horizons.

Orman acknowledges that saving is difficult in today's economy, but she maintains that most Americans can find at least a few hundred dollars more per month to set aside. Her prescription is straightforward: inspect every item on your budget, cut spending to a minimum, and redirect the savings toward retirement. She also notes that financial discouragement is a common barrier — when people feel overwhelmed by their financial challenges, they tend to save less rather than more. Automation is a critical part of the strategy. By setting up automatic contributions from each paycheck, savers remove the temptation to overspend before retirement contributions are made.

The Roth vs. Traditional IRA Trade-Off

Orman's preference for Roth IRAs stems from the tax timing difference. With a traditional IRA, contributions are pre-tax — they don't count as taxable income in the contribution year — but withdrawals are taxed as earned income in retirement. Roth IRAs work in reverse: contributions are made with after-tax dollars, and qualified withdrawals are entirely tax-free.

The distinction carries real financial consequences. Taxable withdrawals from a traditional IRA can push retirees into higher tax brackets and increase Medicare Part B and Part D premiums, which are income-based. For young workers who are likely in lower tax brackets now than they will be in retirement, paying taxes upfront on Roth contributions can be the more cost-effective choice. Contribution limits and eligibility rules for Roth IRAs are set by the IRS and can change annually, so savers should verify current limits against the latest official guidance.

Planning for a 30-Year Retirement

Orman's longevity guidance is blunt: plan to live until at least 95, and up to 100 if family history suggests it. That means retirement portfolios need to fund three decades or more of expenses. She recommends keeping some assets in stocks for growth potential, since bonds alone may not generate sufficient returns to sustain a multi-decade withdrawal strategy.

Delaying Social Security to age 70 is another key lever in Orman's plan. Benefits claimed at 70 are higher than at full retirement age, and the Social Security Administration adjusts benefit amounts based on claiming age. For a Gen Zer who starts planning now, the combination of early compounding, tax-efficient accounts, and delayed benefits creates a retirement income stack designed to withstand a long lifespan. Social Security rules and benefit calculations are subject to legislative changes, so individuals should check the Social Security Administration's latest guidance before making claiming decisions.

This article is for informational purposes only and does not constitute investment advice.