Mark Miller, an expert on retirement and aging with 15 years of writing experience, expresses concern for the millions of Americans who lack financial readiness for retirement. In his latest publication, "Retirement Reboot," he provides six crucial concepts for individuals who are apprehensive about preserving their lifestyle in retirement.
Miller stated in an interview that an individual who turned 55 in 2021 has experienced four significant economic downturns, including the Great Recession and the sudden stop of the COVID recession that lasted for a year.
6 core ideas to ‘reboot retirement’
Miller emphasized the importance of projecting expenses and income prior to retirement on the podcast. Without a plan, one is uncertain, according to Miller. He believes the crucial aspect is thoroughly examining expenses. He supports the combination approach to financial planning, utilizing a computerized robo-advisor (which Miller refers to as the democratization of financial advice) and collaborating with a personal advisor through either a one-time consultation or ongoing sessions. Also read: Top 8 Financial Tips for Adults, Never Ignore these
Plan your retirement
In "Retirement Reboot," Miller collaborated with New Retirement financial planning firm to develop hypothetical retirement scenarios based on various retirement ages. The highest results were for couples who continued working into their late 60s or 70s and continued contributing to their 401(k)s.
According to Miller, middle-income workers with limited savings or no savings will face difficulty funding a prolonged retirement and should consider working longer if feasible or reducing their expenses.
Social Security must be optimized
The key to maximizing your Social Security benefits lies in carefully selecting when to start claiming them. According to Miller, delaying the claim from Full Retirement Age to 70 can boost the size of Social Security benefits by 76%.
Miller refers to it as "the epitome of complexity."
Miller states that the transition from employer-sponsored health insurance to Medicare is filled with difficulties and complexities.
He emphasizes the importance of comprehending the choices involved in enrolling in Medicare, specifically the decision between traditional (Original) Medicare or Medicare Advantage.
Build Your Savings
Miller suggests keeping investments simple by investing in a low-cost stock market index fund for retirement.
If eligible for a 401(k), Miller advises examining the target-date fund options, which allocate funds in a mix of stock and bond funds, shifting towards bonds as the employee approaches retirement.
Miller highlights the significance of investment fees and how they accumulate over time. He states that many individuals underestimate the impact of a 1% annual fee until they perform the calculations.
Tapping home equity
Miller labels home equity as a "neglected financial asset in retirement."
The primary reason for this is the tendency to remain inactive. Many retirees are reluctant to sell their homes and relocate or go through the process of obtaining a home equity line of credit, loan, or reverse mortgage.
However, according to Miller, individuals facing financial constraints can extract value by downsizing to a cheaper home or location.
According to Miller, married couples can spend $4,000 to $5,000 annually on long-term care. This can add up to a significant amount over the course of a 20 to 25-year retirement.
Long-term care insurance combined with life insurance, also known as hybrid policies, is not feasible for many due to the high upfront costs.
However, Miller suggests using deferred-income annuities as an alternative, as they offer lower-cost coverage for long-term care in the future. With this option, an individual could purchase a deferred-income annuity in their 60s, and it would begin paying benefits in their 80s.
FAQs Related to 6 core ideas to ‘reboot retirement’
Q. What are the 6 core ideas to reboot retirement?
The 6 core ideas are:
a. Delaying retirement
b. Working longer
c. Saving more
d. Investing smarter
e. Protecting retirement income
f. Staying healthy
Q. Why is delaying retirement a core idea to reboot retirement?
Delaying retirement is a core idea because it allows individuals to continue earning a salary, saving more for retirement, and reduce the number of years they will need to rely on their retirement savings.
Q. What is the benefit of working longer in retirement?
Working longer provides individuals with additional income, which can be used to supplement their retirement savings, pay for living expenses, or pay off debt.
Q. Why is saving more a core idea to reboot retirement?
Saving more allows individuals to build up their retirement savings, which will provide them with the financial security they need in retirement.
Q. What is the importance of investing smarter in retirement?
Investing smarter is important because it helps individuals to maximize the growth of their retirement savings and ensures that they have enough money to support themselves throughout their retirement years.
Q. How can individuals protect their retirement income?
Individuals can protect their retirement income by diversifying their investments, purchasing annuities, or investing in long-term care insurance.
Q. Why is staying healthy a core idea to reboot retirement?
Staying healthy is important because it can help individuals reduce their medical expenses and increase their lifespan, which will enable them to enjoy a longer retirement.
Q. Can individuals work part-time in retirement?
Yes, individuals can work part-time in retirement to supplement their retirement income and stay active.
Q. Is it possible to save enough for retirement if you start late?
Yes, it is possible to save enough for retirement even if you start late. However, it will require more discipline, focus, and effort to reach your retirement savings goals.
Q. How can individuals balance saving for retirement with paying off debt?
Individuals can balance saving for retirement with paying off debt by prioritizing their debt repayment, creating a budget, and automatically transferring a portion of their income into a retirement savings account.