Would You Buy A Car With Your Roth IRA? Suze Orman Calls It 'The Worst Financial Advice I've Ever Heard'

Yahoo

13-05-2025

Using a Roth IRA to buy a car might sound like a smart move if it means avoiding debt. But financial expert Suze Orman says it's one of the worst things you could do with your retirement savings — and she didn't hold back when a podcast listener asked about it.
On a recent episode of her "Women & Money" podcast, Orman responded to a listener named Sarah, who asked if she should tap her Roth IRA to buy a new car.
Don't Miss:
Deloitte's fastest-growing software company partners with Amazon, Walmart & Target –
Maker of the $60,000 foldable home has 3 factory buildings, 600+ houses built, and big plans to solve housing —
Sarah had been driving her 2003 Honda Accord for nearly two decades and had finally decided it was time for an upgrade. She was approved for a $25,000 car loan with a 5.95% interest rate but wondered if she should skip the loan and take money from her Roth IRA instead — penalty-free — using only her principal contributions.
Her financial adviser said she could withdraw the funds without a penalty since the account had been open for at least five years and she was only taking out contributions. Sarah is 47 years old and earns around $90,000 a year. She has about $400,000 in retirement savings, $13,000 in cash, and contributes regularly to her savings and retirement accounts.
Orman didn't mince words. "That is the worst financial advice I've ever heard in my life," she said, calling out the adviser's misunderstanding of Roth IRA withdrawal rules.
Trending: Many are using retirement income calculators to check if they're on pace —
She clarified that while it's true Roth IRA contributions – not earnings – can be withdrawn at any time without taxes or penalties, the five-year rule does not apply to original contributions. That part of the adviser's advice, she said, was flat-out wrong.
But more importantly, Orman emphasized the long-term cost of pulling from retirement to pay for a car. "If you were to have left that $25,000 in there at just a mere 8% annual average rate of return for 25 years...you're looking at $171,000 tax-free," she explained. "That's what your financial adviser is telling you that you should spend on this car."
Instead of touching the Roth IRA, Orman recommended taking the auto loan. She noted that if Sarah financed the $25,000 over three years at 5.95%, her monthly payment would be around $760, with a total interest cost of about $2,300. In her view, that was a far better option than sacrificing decades of compound growth in a tax-free retirement account.
Orman also pointed out that Sarah's $13,000 in liquid savings should remain untouched as an emergency fund — not used for a car down payment or extra loan payments.The moment served as a cautionary tale not just about Roth IRAs, but about relying too heavily on advice that might not be well-informed.
"You go and ask experts what you should do with your hard-earned money," Orman said. "You trust them."
Her final suggestion? If your financial adviser recommends using your Roth IRA to buy a car — it might be time to find a new one.
Read Next:Nancy Pelosi Invested $5 Million In An AI Company Last Year —
Image: Shutterstock
UNLOCKED: 5 NEW TRADES EVERY WEEK. Click now to get top trade ideas daily, plus unlimited access to cutting-edge tools and strategies to gain an edge in the markets.
Get the latest stock analysis from Benzinga?
APPLE (AAPL): Free Stock Analysis Report
TESLA (TSLA): Free Stock Analysis Report
This article Would You Buy A Car With Your Roth IRA? Suze Orman Calls It 'The Worst Financial Advice I've Ever Heard' originally appeared on Benzinga.com
© 2025 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.