Suze Orman Has a Warning About the Biggest Number on Your Balance Sheet

Suze Orman, host of the Women & Money podcast, has long taught that the most common way people calculate net worth is wrong. In a Suze School lesson republished as Classic Suze School: A Different Way To Think About Your Net Worth, she takes aim at one habit. People count all of their home equity. She puts it this way: “You always include 100% of the equity that is in your home, but it’s in your home.”

Then she asks: “Are you really safe counting the equity that you have in your home as part of your net worth? I can tell you by the number of emails that I’ve gotten, they thought they were, but it’s not part of their net worth anymore.”

For retired people, this is a big deal than you might think. Home equity is the largest asset on most retirees’ balance sheets. If that number decides when you retire or how much you withdraw, losing or hurting the house takes away the cushion your whole plan depends on.

Orman Is Right, and Liquidity Is Why

Her advice is sound. A net worth figure only helps if it tells you what you could actually spend. That depends on liquidity, meaning how fast you can turn an asset into cash at a fair price without giving up something you need.

A brokerage account passes that test. You place a sell order and the cash arrives within days. Home equity is harder to reach. You have three ways to get at it: sell the house and move, borrow against it with a home equity line of credit, or take out a reverse mortgage. Every one of them costs you something. HUD’s counseling handbook warns reverse mortgage borrowers about “rising debt, falling equity.”

Orman contrasts stocks with homes: “Stocks are always liquid. It’s not like an event happens and all of a sudden the house is gone.” And more frankly: “You do not live in the stock market, but you live in your home.”

Picture two retired people with the same net worth on paper. The first keeps most of it in investment accounts and owns a modest home outright. The second has most of it tied up in the house and only a thin layer of savings. On a spreadsheet, they look equally wealthy.

Then a storm hurting both homes, and the water damage turns out to be excluded from coverage. Orman warns about exactly this: “You have a hurricane and you’re damaged, but the real damage is from the water that comes in after, not covered.” The first retired people pays for repairs out of liquid accounts, and the plan holds. The second retiree’s wealth is trapped in a damaged house. A lender is unlikely to extend new credit against a property that just lost value.

There’s a second cost, and it shows up before any disaster. “It is very dangerous when you think you have more money than what you actually have, because when you feel like you have a whole lot of money, you then also feel that you can spend more than probably you should be.” When home equity expands the number, people tend to retire earlier, withdraw more and assume they’re more ready than they are.

How Much of Your Wealth Lives Under One Roof

How much this matters to you depends on the share of your net worth tied up in home equity.

If equity is a small piece, taking it out barely changes your total. Losing the house would be painful, but your retirement income would survive. If equity makes up most of your net worth, the number without it may show that your real retirement cushion is much smaller than the headline figure. The gap between your two numbers measures your false confidence, and it is the same sequence-risk problem a bad market or a bad storm creates in year one of retirement (we laid out how to defend those first few years in a free guide here: The First Five Years).

Insurance quality affects how big that gap really is. Orman asks: “Does your insurance policy cover you for replacement value or only what it’s insured for?” A policy that falls behind rebuilding costs leaves part of your equity exposed, even when the damage is covered.

Run the Orman Test Before Your Next Retirement Decision

1. Calculate two net worth figures. One includes the house. The other leaves it out. Orman’s instruction: “Look at what your net worth is without the equity in your home, so that you get a realistic view as to what you really could afford if all of a sudden your home went away.”
2. Build your withdrawal plan on the second number. Your retirement date and annual spending should hold up even if the house produced nothing.
3. Read your homeowners policy for exceptions. Orman notes that “most insurance policies do not cover floods or earthquakes” and other perils. Check whether your policy pays replacement cost, and ask your agent which risks in your area need separate coverage.
4. Create a home inventory. She recommends listeners to “write down and take pictures of absolutely every single thing that you have in that house,” because after a total loss, memory fails. A documented inventory speeds up claims and protects your payout.
5. Treat future access to equity as a backup plan. If you expect to downsize, borrow or use a reverse mortgage someday, leave it out of your baseline. HUD requires reverse mortgage counseling for a reason: the trade-offs are real and they cost money.

Your home is first a place to live. It becomes cash only under conditions you don’t control, so build your retirement around the money you can actually reach.

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