Suze Orman warns Americans about 401(k)s, tariffs, recession fear
Stock values have cratered in the two days since President Donald Trump unveiled his global tariff plan after the close of trading on April 2 — and millions of Americans have watched helplessly as their 401(k)s and other investments quickly crumbled.
The damage to markets was “significantly larger than expected,” Federal Reserve Chair Jerome Powell said April 4 at a Society for Advancing Business Editing and Writing (SABEW) conference.
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Personal finance author and media personality Suze Orman issued a warning for readers and offered some financial recommendations about how to handle the pressure-packed situation.
If the tariffs proceed as announced and affect trade, Orman explained, the economy could be headed for difficult times and the question of whether a recession is imminent looms.
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Americans are understandably concerned about the short-term and long-term ramifications of financial hardship — including about the value of their 401(k)s and other retirement savings.
Orman discussed those worries, how they affect people and suggested some important ways Americans can react.
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Suze Orman warns Americans about fear, finances and 401(k)s
Regarding recession concerns, Orman acknowledged that workers, in addition to retirement savings worries, are also nervous about potential layoffs.
“I won’t tell you not to be fearful of the financial road ahead,” Orman wrote in a newsletter. “But I need you to listen to me: Don’t make financial decisions out of fear.”
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Orman mentioned her belief that fear can be a big “destroyer of wealth.”
“When we are fearful, we tend to follow our emotions rather than use our brains to focus on what we need to do — and not do! — to reach our long-term goals,” she wrote.
Focusing on the future, Orman explained her view that people should stick to their diversified investment strategies.
“And don’t stop contributing more to your retirement accounts,” she wrote, referring to 401(k)s and IRAs (Individual Retirement Accounts). “When markets are down, your money buys more shares. More shares that history has shown us eventually rebound.”
People about five years away from retirement should try to have three years of living expenses tucked away in cash.
And those worried about a recession, Orman wrote, ought to have at least eight months of cash in an emergency fund.
“That gives you time to ride out corrections and bear markets without having to touch your stocks,” she wrote.
Related: Dave Ramsey bluntly warns Americans about Social Security
Suze Orman shares key advice on 401(k)s and IRAs
Employer-sponsored 401(k) plans frequently offer company matches, which Orman advises workers to take advantage of and contribute the full matching amount.
She advises contributing 10% to 15% of a person’s income, depending on how old one is and their financial capacity.
Many companies offer a Roth 401(k) option, which Orman suggests choosing, because taxes on those are paid before contributions are made. This allows for tax-free withdrawals in retirement.
Orman has similar advice about IRAs. For the same tax purposes, she recommends investing in Roth IRAs rather than traditional IRAs.
Beginning to invest as early as possible in one’s career is important because it gives one more time to leverage compounding growth. This is key because it allows a person to make the most out of their investments and possibly exceed their retirement savings goals.
During uncertain economic times, Orman explains, it is even more important to stay away from taking on any new debt.
“It’s also a great time to work hard on reducing any high-rate debt you have,” Orman wrote. “The less debt you have is always good for your financial security, but it becomes even more important when you are worried about job security if a recession materializes sooner than later.”
“I hope you will take this seriously and give your finances a thorough review to separate your ‘needs’ spending from your ‘wants’ spending,” she added. “Be brutally honest with yourself. If you are fearful about anything, cutting out ‘wants’ spending will give you money to put toward dealing with fears.”
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