Suze Orman's Top Financial Tips for 2026: Ditch Target-Date Funds and Take Control

Why Suze Orman Says to Ditch Target-Date Funds in Your 401(k)

Suze Orman, host of the Women & Money podcast, delivered a blunt verdict on the most popular default option in American 401(k) plans in June 2026. Target-date funds are built on assumptions that can cost you tens of thousands of dollars in retirement. Orman’s position is unequivocal: age-based investing is a dangerous oversimplification that ignores economic reality.

“When people ask me whether target-date funds are a good investment, my answer is simple: They're built on assumptions I don't agree with. Target-date funds assume you should invest based on your age. You shouldn't. You should invest based on your needs and what's happening in the economy.”

If you were auto-enrolled in your 401(k), the assumption she is attacking is probably sitting in your account right now. A typical target-date fund follows a glide path that mechanically shifts your asset allocation from stocks to bonds as you near retirement. That formula ignores the yield curve, your pension status, your spending needs, and whether bonds are a good deal that month.

• Target-date funds set the stock-to-bond ratio using only one variable: years to retirement.
• They do not consider inflation trends, interest rate forecasts, or personal risk tolerance.
• They buy bonds whether yields are 1% or 5%, regardless of the potential for price declines.

Invest Based on Needs and the Economy, Not Your Age: Orman's Alternative Strategy

Orman’s alternative strategy rejects the one-size-fits-all mantra of target-date funds entirely. She advises investors to ignore age-based formulas and instead tailor asset allocation to their specific financial goals and the prevailing economic environment. Your spending needs, not your birth year, should drive how you invest.

This approach demands active management—not day-trading, but periodic adjustments based on market conditions. For example, when the 10-year Treasury yield sits near 4.6% (as it does in mid-2026) and the Federal Reserve has begun cutting rates from a peak of 4.5%, a retiree might favor shorter-duration bonds or dividend-paying stocks over a rigid 50/50 split. Orman recommends reviewing your portfolio at least annually and making informed shifts based on yield curves, inflation data, and your own withdrawal timeline.

1. Assess your actual income needs from your portfolio, not a generic replacement rate.
2. Evaluate the current interest rate environment and its impact on bond prices.
3. Choose low-cost index funds or a managed portfolio that adjusts to economic signals.
4. Rebalance intentionally, not by a preprogrammed calendar that ignores the macro.

The Hidden Danger of Automatic Bond Shifting in 401(k) Plans

The mechanical shift into bonds that target-date funds enforce is not merely suboptimal—it can be actively destructive. When yields rise, the price of existing bonds falls. A typical intermediate bond fund with a duration of about six years loses roughly 6% of principal value for every 1 percentage point rise in rates. A 2030 target-date fund with half its money in bonds does not escape that math.

Consider a 62-year-old with $500,000 in a 2030 target-date fund at a 50/50 split. Long rates climb another 100 basis points over the next year. The bond half loses around 6%, roughly $15,000 of principal, before any coupon income offsets it.

That $15,000 loss hits at the exact moment the investor needs stability—just as they begin withdrawing. Orman points out that this structural flaw affects most auto-enrolled employees, who may not even realize their 401(k) is invested in a fund with this risk. She urges investors to review their plan offerings and consider alternatives like a diversified mix of low-cost index funds or actively managed portfolios that adjust to market conditions. Just as companies like those behind Taylor Swift’s tech-driven business empire are rethinking their strategies for the digital age, individuals must rethink the assumptions embedded in their retirement accounts.

Key Takeaways

• Reject the age-based investing mantra of target-date funds; instead invest based on your needs and what the economy is doing.
• Be aware that automatic bond shifting in 401(k) plans can lock in losses when rates rise, especially near retirement.
• Actively manage your asset allocation using personal goals and current economic signals, not a static formula.
• Review your 401(k) default options—if you were auto-enrolled, you may be in a target-date fund that doesn't suit you.
• Consider low-cost index funds or other strategies that offer more control and flexibility compared to target-date funds.
• Stay informed about interest rate trends and adjust your portfolio accordingly to avoid major losses.