There is no way to turn these suggestions off using the default apps. As long as you are using the default virtual keyboard the suggestions will appear.
Installing an alternate virtual keyboard such as Better Keyboard or SlideIt will enable you to disable the suggestions. Better Keyboard includes a setting to turn hardware keyboard suggestion on/off. Using Slideit disables the suggestions.
To make use of the suggestions, since you can't turn them off:
- The word in red will be inserted if you hit the space bar or punctuation
- You can touch a word to insert it to speed up typing linger words