Editor’s note: Mark Miller serves as vice president on the board of directors of Evanston RoundTable Media NFP.
Evanston journalist Mark Miller has spent the last 15 years reporting and writing about retirement and aging – and now he’s packed what he has learned into a new book, Retirement Reboot: Commonsense Financial Strategies for Getting Back on Track (Agate, 2023).
Miller’s book focuses on an often-ignored group in the world of personal finance: less-affluent people who are approaching retirement without significant savings or investments. Retirement Reboot provides detailed planning strategies for retirement security, including how to build savings up to the point of retirement and beyond, how to navigate Social Security and Medicare, and when to time retirement, plus guidance on making work, housing and lifestyle choices.
The following is an edited version of a conversation with Miller.
What led you to write this book?
I’ve been writing about retirement for 15 years now, and I’ve been struck by how much of the personal finance journalism that is published focuses on investing and Wall Street. That leaves about 60% of households out of the discussion – that’s the group that hasn’t been able to save and invest for retirement. I wanted to do a more holistic book investigating ways that these folks might still improve their retirement outcomes, even if they are close to leaving the workforce.
You emphasize that many Americans are financially unprepared for retirement. Why is this so?
I look at “retirement readiness” in simple terms – it’s your ability to maintain your standard of living after you stop earning wages.
Over the last 40 years, we have had a big shift in the way we fund retirement, placing the onus on the individual to save for retirement and to manage savings and investments through IRAs and 401(k)s. Before that, many workers had traditional defined-benefit pensions, which really ran on auto-pilot in the background and then provided a guaranteed lifetime income source in retirement.
The 401(k) approach has worked very well for the top third of households, who have sufficient income to sock away money in tax-deferred retirement accounts, and they benefit the most from the tax deferral.
But the data show that the other two-thirds of households close to retirement have only saved small amounts, if anything. That means they will need to rely almost entirely on Social Security , which replaces on average only 40% of preretirement income.
Since a general rule of thumb is that you need to replace about 70% of your preretirement income in order to maintain your standard of living, there is a big gap for the majority of people. I should add that many people still do have traditional pensions, especially those who work in public sector jobs. And the book includes a chapter about how to manage a pension, if you’re lucky enough to have one coming to you.
You write that Social Security and Medicare are the most important things to consider when planning for retirement. What do we need to understand about these programs?
Let’s talk about Social Security first. Most people will do better by delaying the time they begin to claim their benefits. You can claim a retirement benefit as early as age 62 and as late as 70. The difference in the income that comes from a claim at 62, compared with 70, is really dramatic – it translates to 76% more monthly income. Many people don’t understand how beneficial it can be to delay your claim.
Not everyone will be able to wait until age 70, and not everyone should – there can be very good reasons to claim earlier. But as a general rule, I think more people should be delaying their claim.
I look at Social Security as “longevity insurance.” That’s the risk of outliving your resources, and it’s actually the biggest risk to a retirement plan. Maximizing your benefit through a delayed claim is the best way to mitigate that risk – and your benefit is adjusted every year for inflation.
In navigating the complexities of Medicare, what are the most important choices retirees need to consider?
There are two headline takeaways. One, you need to pay careful attention to the timing of signing up. Failing to sign up at the right time can be very expensive. You are required to sign up at age 65 – with one important exception: If you’re still actively employed at that age, you can delay. But failing to sign up at the right time will subject you to significant late-enrollment penalties added to your premiums, and they are lifetime penalties.
The second headline is that people need to understand that, at the point of initial enrollment, they must make a critical decision that may be irrevocable: the choice between traditional Medicare and Medicare Advantage, which is a managed care option provided by private insurers.
If at all possible, if you can afford the higher upfront premiums of traditional Medicare, I advise people to pick that option. Traditional Medicare, including Part B and a Medigap plan, is the gold standard of health insurance in the United States – it provides you with the widest possible access to health care providers, and the most reliability of covering health care expenses over the course of retirement.
Plus, you won’t be saddled with the bureaucratic hassles of managed care, such as “prior authorization” requests and the possibility that an insurer may refuse to cover some things outright.
A choice of Medicare Advantage when you first enroll may be irrevocable in this sense: When you first sign up for Part B, you have what’s known as a “guaranteed issue” window to purchase a Medigap supplemental policy, which lasts for six months.
That means a Medigap insurance underwriter must sell you a policy without regard to any pre-existing conditions, and at the best prevailing price. Once that window closes, you might not be able to buy a Medigap. So while you can move out of Advantage and into traditional Medicare down the road during the annual fall enrollment period, you might practically be prevented from doing that if you can’t also buy a Medigap policy – supplemental coverage really is a must in the traditional program.
Why is it important to get financial advice about retirement?
Most of us are not professionals at planning retirement. Professionals can give us insight into where we stand. The most important step is to make a plan. If you don’t have a formal plan, you are flying blind.
Even doing it yourself, using online tools, is better than doing nothing. Most financial planners use software that can do a variety of valuable “what if” analyses, giving you a context for decision-making: What if I increase my contributions to a retirement account? What if I delay Social Security? What if I retire earlier or want to work longer?
I also go into detail about how to choose an adviser. You need to work with someone who is a fiduciary at all times – legally required to act with your best interests in mind. [See this New York Times article that excerpts Miller’s chapter on finding a financial planner.]
What advice would you give to someone who has not saved money and wants to get started?
One bit of good news about our retirement system is that it’s become very possible over the past couple of decades to invest simply and at low cost.
This is an area that can be intimidating for a lot of people, but there’s been a massive shift to “passive investing,” which means putting your money into an index mutual fund that spreads your investment across the entire stock market, so there’s no worry about deciding what stocks or funds to pick. And these funds carry very low fees.
Most people don’t understand just how critical it is to keep your investing costs low, because it translates into so much more money in your pocket in retirement, not in the pocket of the investment company. These costs compound over the years in ways that I think would really shock most people.
My other message is that even if you start late, it is possible to accumulate significant savings, because the finish line is not the day you retire; you can continue investing into retirement, and your portfolio can continue to grow.
There is no doubt that starting on this at a young age is a huge advantage, because you have years and years for those dollars to accumulate returns and grow; but it is still possible to get significant benefits with a relatively late start.
What concerns do you have about the future of Social Security and Medicare?
Both of these programs have financial problems that need to be addressed. But I argue that these two social insurance programs are the critical cornerstones of retirement security for most Americans, and that the solutions must not involve further cuts in benefits or privatization.
The last chapter of the book lays out a series of ways we should expand Social Security – not cut it. And with Medicare, we need to push back against the tide of privatization that has taken hold over the last couple of decades. At a minimum, we need to level the playing field between traditional Medicare and Medicare Advantage. [See Miller’s recent Newsweek essay on the future of Social Security.]
What does a good retirement look like to you?
For me, it will be a “glide path” to retirement, rather than a hard stop. Over time, I’ll probably do a little less writing about retirement and pivot even more strongly toward some of my other interests.
That includes, of course, my ongoing work with the Evanston RoundTable and the broader movement to save local journalism here in Chicago and around the country. I am also a musician: I play in an alt-country band called Steel String Highway and I study guitar and banjo at the Old Town School of Folk Music. My wife and I have three adult children, and now a grandson in Washington, D.C. So it goes without saying that we’re spending a lot more time out there, and want to do more of that.
You and your family are longtime Evanstonians. Is Evanston a good place to age?
I think we have a lot of work ahead of us to make Evanston an age-friendly community. That challenge isn’t unique to Evanston. All communities are facing similar challenges.
One chapter of the book deals with “aging in place,” something many people want. Is the house you live in a place you can age, from the standpoint of safety and other adjustments? If you get to the point where you are not driving anymore, is there a transportation network in the community that helps you get around conveniently? Does the community help people identify trustworthy services for support in the home?
Evanston has discussed these issues to a certain extent, but we haven’t done much about it yet. The simple fact is that our community is getting older, and there are challenges and even some opportunities associated with that.
I’d argue that aging should be considered in the overall framework of diversity in our community. I don’t think we’ve put the topic into that frame – yet. I really hope that we will, though.