Suze Orman Says This Is the Biggest Financial Mistake You Can Make

Suze Orman is known for having strong opinions, and this one may be her most fervent.

There are a lot of financial mistakes we can all make. Even seasoned experts make their fair share of mistakes (I certainly still make them from time to time).

Sometimes we make small blunders -- like using the wrong rewards credit card. Other times, we end up with bigger problems, such as racking up five-figure credit card debt. With so many different scenarios out there, it's hard to say any one misstep is the absolute worst.

Or so you'd think. Turns out, personal finance expert Suze Orman has no problem identifying the biggest mistake you can make. And it has nothing to do with credit cards, mortgages, or even debt.

According to Orman, it's retiring early. “You can do it if you want to," she said recently on the Afford Anything podcast. "I personally think it is the biggest mistake financially speaking, you will ever, ever make in your lifetime.”

Retiring early has opportunity cost

A cornerstone of Orman's financial platform has long been that you should work as long as you possibly can. In her eyes, retiring before 70 is asking for trouble. And there are a few reasons why.

Perhaps the biggest issue Orman has with early retirement is related to compound interest. According to Orman, every year you aren't making retirement contributions -- you know, because you're retired -- is millions in lost interest.

Orman notes that if you reach financial independence and stop putting money into your retirement accounts, you're losing the compounding years of your life. "When you are younger, your money that you invest makes money," Orman told Afford Anything. "And that money makes money, and that money makes money, and your money compounds and you cannot make up for that with sums of money later on in life."

Job benefits are a big worry for Orman

But it's not just the missed compounding interest opportunity that makes Orman staunchly against retiring early. She also believes early retirement could leave you at risk for financial ruin in the case of a disaster.

On this front, she's not entirely wrong.

For one thing, the U.S. is one of the few developed countries where health insurance is tied to your job. If you retire early, affording quality health insurance can be tough (even having a job doesn't guarantee you can afford good insurance.) This is especially true if you're not old enough to qualify for Medicare.

But it's not just health insurance that's an issue. Many jobs also provide disability insurance that can be vital if you have an accident. And, as Orman puts it, "things happen."

Someone who retires early loses those work-related benefits. They also start drawing on their portfolio, meaning they have less leeway for big medical expenses. If you work until 70, you can lessen that uncertainty.

Describing a worker who retires at 30, Orman explained, "If something goes wrong from 30 til 70 -- now they're in trouble." She contrasted that by saying, "The other worker is probably covered by the policies and everything that is at work. Once they retire and they're at 70, now, alright. They still have their portfolios. They haven't drawn them down."

Learn more: Best IRA Accounts

It takes $5 million (or more ) to make early retirement safe

In Orman's mind, you should only think about early retirement if you're prepared to weather any possible financial catastrophe. And what's the number for that? For her, it's $5 to $10 million, minimum. Ideally, it's $20 million or more if you want to retire young.

Only have $1 million or $2 million and want to retire at 30, 40, or even 50? Orman says that's not going to be enough.

“Two million is nothing. It’s nothing. It’s pennies in today’s world, to tell you the truth,” she said, adding that $2 million dollars can seem like a lot to people in their 30s. "You may think…you can live on $80,000," Orman explained. "But I promise you…if you think $80,00 a year as you get older is going to make it for you before taxes, I have a bridge to sell you."

Part of Orman's sky-high valuation is due to her strong thoughts on our economic future. She thinks artificial intelligence and unemployment will mean higher taxes and fewer social safety nets.

"Artificial intelligence is coming in big time," Orman said. "Do not be surprised if by 2030 there is a 25% unemployment rate." Orman went on to explain: "When people are no longer working because machines have replaced all of us, there is nobody paying into the tax structure. When nobody is paying into taxes, tax brackets will have no choice but to go up. There will not be the money there for social security."

Whether her predictions for the future will come true remains to be seen. But even if you don't agree with her vehement disdain for the idea of early retirement, you have to admit she makes some valid points. If you're working toward early retirement, be sure you have contingencies in place, like an emergency fund, for when "things happen."