Like most personal finance writers, I think Suze Orman leaves something to be desired when it comes to investing. But like most personal finance writers, she's good at the basic stuff, which is living within your means. Her "2009 action plan" is available as a
free download from Oprah until the 15th of January, and I recommend that anyone who is--like most of America--trying to get onto sounder financial footing this year check it out.
Given his interest in Gupta, I wouldn't be surprised if Obama created a "Chief Personal Finance Scold" position in his cabinet for Suze.
Personal investing is too subjective and complex a topic for any personal financial advice columnist to give anything but the most cursory, high level overeview.
Investing is not something for which you want to rely on a cursory, high level overview.
I have also found, very frustratingly as well, that just because one is a financial adviser, she needn't know a thing about economics (and I'm not just talking about Suze)
I have often thought that anyone who doesn't already understand everything preached by Suze Orman is beyond help, but I also think some people enjoy the discipline she offers.
I hate to be a scold myself, but shouldn't the post open as I think Suze Olman, like most personal finance writers, leaves something...?
I'm thinking Megan is watching a little too much daytime TV while blogging. First QVC, now Suze. Next she'll be talking about shamwow and Conan
Suze Orman is just another TV loudmouth know-it-all. If a person doesn't know financial common sense, they aren't gonna learn it from TV.
One year ago I would have fully agreed with you about Suze's investment advice. This year she looks pretty smart. It would be interesting to track the performance of her advice vs. say yours. What would Megan be worth right now if she had followed Suze's investment advice.
As you say, the basic live within your means, get out debt, save some money advice has always been good.
Don't diss on the Shamwow, The Chad. It pays for itself.
Dave Ramsey is MUCH better at the basics than Suze Orman! He also seems to be replacing her in the media as the "go to guy" for media interviews on the topic of personal finance.
I think today's market has made Suze Orman look like an idiot! Case in point: She hates annuities. (She doesn't understand them, but hates them anyway.) She's a huge mutual fan But the bear market of the last 2 1/2 years has made people who signed on with a guaranteed minimum income benefit, or an equity-indexed annuity, or even a plain old fixed annuity look like geniuses while the people following her advice and Ramsey's advice are beating their breasts and gnashing their teeth.
Dave Ramsey, whose idea of asset allocation involves "a growth stock, growth & income, and international fund" (Nary a bond to be had, to say nothing of REIT exposure, small-caps, permanent life insurance, or a host of other asset classes) is even worse.
Most professional financial advisors listen to them for laugh lines. Me, included.
I think Dave Ramsey's a wonderful motivator for debt reduction... but so much of his other advice is just retarded. How many times have you heard him and his ilk advise people to invest in something like a 20 year level term insurance policy? Why would you want to overpay in your first 15 years or so of the term to lock in a level term when mortality is decreasing over time, REDUCING insurance costs? If you want term insurance, and you believe in buying term and investing the difference over permanent life insurance (a silly bias, anyway, for a number of reasons I won't get into), then why wouldn't you use the lowest initial premium you could get (an ANNUAL term, or 5-year term at most), and then invest the difference? Your investments, in theory, will cover the costs of higher premiums later in the term.
But Ramsey doesn't understand insurance, so he talks people into absurdly long level term policies with lapse rates of 98%. Who keeps the overpayment on long level term policies when the policy lapses or is replaced?
Hint: It ain't Dave Ramsey's listeners.
I'm not a fan of one product over another. I'm a fan of matching the tool to the client and their situation.
And UGMA/UTMA's for college planning? That's just asinine. Don't even get me started on that. But Dave Ramsey, the man who counseled investors to figure a 10-12% long term return on growth stocks in 1999, and the man who counseled people to dump cash in the bank (earning a few points of interest) in order to pay off their houses early so they could lose money more efficiently and screw themselves during the height of the housing bubble, was still advising people to use UGMAs and UTMAs for college planning, even though anything you move to those vehicles absolutely screws your kids under the Federal Financial Aid system.
But that's not even on his radar. Nor on Orman's. (Hint: Even Coverdell and 529 money counts against the child, even as a parental asset, just not as much. Much better to use a savings vehicle that is exempt from that requirement, grows tax free, will self-fund even if the policy owner is disabled, and doesn't sock you with a penalty if the kids get a scholarship, join the army, or otherwise don't need the money for college.
But the SuperTwits embraced by the financial media won't tell you how to do that. Indeed, if you try to do that, they will actively warn you off of it and tell you the person who taught you how to do that is a scammer.
What a couple of idiots.
Debt reduction? Ok. Ramsey rocks. Hell, he helped me, about 12 years ago. Once you get past that? A disaster.
She hasn’t a clue when it comes to Roth conversions, spent 2 hours trying to get my wife to understand this complete with building spreadsheets. Orman thinks now is great time to covert because the dollar cost of the tax penalty will be low since investments are crushed at the moment. Of course, she and my wife don’t seem to get that dollars don’t matter when thinking about long term returns, if I cut my principle by today 30% vs. 30% 20 years down the road while earning the same return over the intervening 20 years you have the same returns, but by doing it today you give up an option and assume your tax rate will be higher/same after you retire and would access the funds.
Hmm....
In the main, I think Ormond's right on this point.
Tax rates are extraordinarily low now, by historical standards, and I don't see them getting any lower. (Most of Orman's readers are not in the top marginal bracket anyway). Plus, Roths have no RMDs to force you to realize income in disadvantageous years.. which changes things immeasurably. With a Roth, you can let the account grow tax free, unmolested, for an indefinitely long time. Your entire life, if you like, even if you live to be 100. If you kept the account in a traditional IRA, you would be forced to start taking distributions at age 70 1/2... and your funds could be nearly depleted by then.
So it's not simply a matter of taking a 30% tax hit now versus taking a 30% tax hit later. It's a matter of choosing WHEN to take that income tax hit. You may wish to do it when you have some other deductions that put you into a low tax bracket.
And if you like the advantages of a Roth...Tax free growth, lock in today's low tax rates as a hedge against Obama and Pelosi raising income taxes, and NO RMDs!, then now is indeed a great time to do it, precisely because the income tax penalty is low.
(Remember, in order to make this work, you want to pay the tax with OTHER money, that's NOT in a tax-advantaged retirement plan. Presumeably, you have better things to do with this money than send it to the IRS. For most people, the less they can send to the IRS, the better.
Besides...you may not qualify for a Roth down the road, either because of income limitations or because of changes to laws governing conversions.