Mark Miller, who has been writing about retirement and aging for 15 years, is worried about the millions of Americans who feel they’re financially unprepared for retirement. In his new book, “Retirement Reboot,” he offers six core ideas for people feeling nervous about maintaining their standard of living in retirement.
Miller, who also writes the Retirement Revised Substack newsletter, is sympathetic about the financial plight of many preretirees.
“Somebody who was 55 years old in 2021 has lived through four sharp economic downturns, including the Great Recession and the heart-stopper of the COVID recession where we just brought the entire economy to a screeching hall for a year,” Miller told me in an interview.
Meantime, he writes in “Retirement Reboot,” America’s retirement system is riddled with complexity, which he calls “the enemy of everyday working Americans trying to build toward a financially secure retirement.”
Miller told me: “We’ve just built this series of platforms for different parts of retirement that mostly don’t talk to one another, and complexity is almost at the heart of the idea of many of them.”
6 core ideas to ‘reboot retirement’
To help preretirees deal with the complexity, Miller shared with me his core ideas and advice for having a secure financial retirement and spoke about them on the latest episode of the “Friends Talk Money” podcast I co-host with syndicated financial writer Terry Savage and Pam Krueger, founder of the financial adviser vetting service, Wealthramp.com.
Core idea No. 1: Making a plan
That’s about estimating your expenses and income in retirement before you retire.
“If you don’t have a plan, you’re kind of flying blind,” Miller said on the podcast. The most important thing here, he believes, is “really scrubbing the expense side.”
He’s a fan of the hybrid system of financial planning: using a computerized robo adviser (what Miller calls the “democratization of financial advice”) and working with a human adviser either with a one-time consultation or periodically.
Core idea No. 2: Timing your retirement
This is about determining when you can afford to retire.
In “Retirement Reboot,” Miller worked with the financial planning firm New Retirement to derive what-if retirement scenarios based on when different types of people might retire. The best scores went to couples who worked into their late 60s or 70s and who kept contributing to their 401(k)s.
“Middle-income workers with modest savings or no savings are going to have a tough time financing a lengthy retirement and they need to work longer if at all possible, or rework their expenses,” Miller told me.
But he concedes, not everyone can work longer.
“We’ve all heard the mantra ‘work longer.’ I say that’s an aspiration, not a plan, because many times the aspiration to work longer gets interrupted. Either you lose your job, or you have a health problem, or you just burn out,” he said on the podcast.
Even a few extra years of work can have an enormous influence on how much of your preretirement income you replace, though, Miller says.
”It’s kind of a trifecta of benefits,” Miller told me. If you’re working longer, you could be contributing to a retirement plan and building up savings; you can delay claiming Social Security past Full Retirement Age (between 66 and 67 these days), producing automatically larger monthly benefits when you start taking them and you have income to help cover expenses, possibly through employer-subsidized healthcare costs.
All in all: fewer years of living off savings.
Core idea No. 3: Optimizing Social Security
It’s about maximizing your Social Security benefit by wisely choosing when to begin claiming it. Delaying claiming from Full Retirement Age to 70, which few do, can increase the size of Social Security benefits by 76%, says Miller.
“Where is there a better deal? The delayed Social Security credits are worth about 8% for every 12 months,” he adds.
“Social Security is the name of the game when it comes to reducing the risk of outliving your financial resources,” he told “Friends Talk Money.” The reason: it’s guaranteed income.
Married couples have more Social Security options, notes Miller, because they can coordinate their claiming strategies and because they tend to be better off financially to start with. “In many cases, the smart strategy is for the spouse that’s going to have the higher benefit to delay his or her claim beyond Full Retirement Age,” Miller told me.
He added that some people might want to hire a pro for claiming advice or use software like Social Security Solutions. “The strategies suggested by applications can boost your lifetime benefits by as much as a hundred thousand dollars lifetime,” he notes.
Core idea No. 4: Navigating Medicare
Miller calls it “the poster child of complexity.”
Transitioning out of employer-sponsored health insurance into Medicare “is fraught with complexity and pitfalls,” Miller says.
When enrolling in Medicare, he notes, “understand that Decision 1, 2 and 3 is traditional (Original) Medicare or Medicare Advantage; that’s decision tree you’re looking at.”
Miller calls Original Medical “the gold standard of health insurance” and is not a fan of Medicare Advantage plans, even though they often promise coverage traditional Medicare doesn’t offer.
“The case has been made that there is with Medicare Advantage plans, there is a competitive market-driven situation that will lead to better consumer outcomes. I’ve yet to see a shred of evidence that that’s the case,” Miller said on the podcast.
Also, he noted, if you initially go with a Medicare Advantage plan, you don’t buy a Medigap plan. But if you want Medigap later on, you can then be rejected or forced to pay much higher premiums.
Core idea No. 5: Building savings
Here, Miller recommends keeping things simple: invest for retirement in a low-cost stock market index fund.
If you can contribute to a 401(k), Miller says, look into its target-date fund choices, which put money in diversified stock and bond funds, tilting accounts towards bonds as employees age.
“I really am at pains to explain the importance of [investment] fees and how they compound. I think a lot of people say ‘I’m going to pay a total of 1% a year; that doesn’t sound like much,’” says Miller. “Until you do the math on it.”
Remember, he adds: “the end goal is not the day you retire. If you’ve built a little nest egg starting in your 50s, that keeps growing when you’re in retirement.”
Core idea No. 6: Tapping home equity
Miller calls home equity “an overlooked financial resource in retirement.”
The chief reason: inertia. Many retirees don’t want to sell their homes and move or go through the process of getting a home-equity line of credit, loan or a reverse mortgage.
“But for somebody in a financial pinch, value can be extracted by moving to a less expensive home or a less expensive venue,” Miller said on the podcast.
He isn’t enamored of reverse mortgages, though, because they are “another example of an extremely complicated product.
What about long-term care risk?
One more thing: Miller told me he wishes he had better answers for the question of managing your long-term care risk in retirement.
Long-term-care insurance policies, he said, “aren’t great. The premiums keep going up.”
For a married couple, he adds, they can run $4,000 or $5,000 a year. “That’s a lot of dough over a 20- or 25-year retirement,” Miller says.
Hybrid policies combining long-term-care insurance and life insurance are unaffordable for many because “they require plunking down large sums up front,” he notes.
But Miller said on the podcast, deferred-income annuities could be used to pay long-term care in the future at a lower cost than an immediate annuity. You might buy a deferred-income annuity in your 60s and it would start paying benefits in your 80s.
“I wish I had a magic answer about long-term care risk,” said Miller. “I don’t.”