Suze Orman Says If You Lose Your Job, Charge Your Bills and Pay the Minimum Before Tapping Your 401(k) — ‘You’re Going to Think I've Lost It’

Losing a paycheck has a way of making a 401(k) look like a life raft.

Personal finance expert Suze Orman says that's the wrong account to grab first, and her alternative is the last thing anyone expects to hear from her.

"Before you use any cash, before you take money out of any retirement account, I would like to see you put any expenses you can on your credit card and only pay the minimum payment due when the bill comes in," Orman said on her "Women & Money" podcast in October. "Remember, credit cards can be discharged in bankruptcy."

She knew exactly how that would sound. "I know you're going to think I've lost it," she said.

From someone who has spent decades warning Americans about credit card debt, it's a genuine plot twist.

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The Logic Behind the Swipe

Orman's reasoning comes down to what a bankruptcy court can and can't touch.

Credit card balances are unsecured debt, which can generally be wiped out in Chapter 7 bankruptcy. Retirement accounts get far better treatment. Employer plans like 401(k)s have unlimited protection in bankruptcy, while traditional and Roth IRAs are protected up to $1,711,975 through March 2028.

That means someone who drains a 401(k) to cover the mortgage and groceries, then files for bankruptcy anyway, has turned protected money into spent money. Charging those same bills leaves the retirement account standing.

Then there's the toll for tapping it early. Withdrawals before age 59.5 generally come with a 10% penalty on top of income taxes. Pull out $18,000 to cover six months of $3,000 bills, and $1,800 disappears to the penalty before the IRS even gets to taxes.

The Eight-Month Gut Check

Orman pairs the credit card strategy with a rule she has leaned on for years. If the money in a retirement account wouldn't cover at least eight months of expenses, she says to leave it alone, because a job search can easily run that long.

Government data backs her up. In July 2026, 1.8 million people had been unemployed for 27 weeks or longer, according to the U.S. Bureau of Labor Statistics.

She Has Played This Card Before

This isn't the first time Orman has rewritten her own rulebook in a crisis. In the early days of the Covid-19 pandemic in 2020, she pointed viewers to the same strategy on the "TODAY" show.

"Can you believe Suze Orman's telling you, ‘Please use your credit cards?’" Orman said. "And only pay the minimum payment due on them."

Before Anyone Starts Swiping

The strategy comes with a price tag. Credit card accounts carrying a balance were charged an average of about 22% in August 2026, according to Federal Reserve data. At that rate, an $18,000 balance runs roughly $335 a month in interest.

The math only tips in Orman's favor if bankruptcy is a real possibility or a new paycheck arrives fast enough to dig out. Anyone with a solid emergency fund or a quick path back to work is still better off spending cash and steering clear of high-interest debt.

Bankruptcy isn't automatic, either. Chapter 7 requires passing a means test, and creditors can challenge charges made shortly before a filing, especially luxury purchases and cash advances. A Chapter 7 filing can also stay on a credit report for up to 10 years.

Workers 55 and older may have another option. Under the IRS Rule of 55, people who leave a job in or after the year they turn 55 can generally withdraw from that employer's 401(k) without the 10% penalty, though income taxes still apply.

Credit cards have been Orman's favorite villain for decades, so hearing her say "swipe" feels a little like a fire marshal recommending matches. Her point is narrower than it sounds. When the paycheck stops and bankruptcy is on the table, a card balance can be wiped away, but a drained 401(k) is gone for good.

Anyone weighing this move should talk with a bankruptcy attorney or a nonprofit credit counselor first.

On the date of publication, Caleb Naysmith did not directly have a position in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.