The Long View

Mark Miller: Less Investment Choice = Better Retirement Outcomes

Episode Summary

The nationally recognized expert on retirement and aging discusses the state of retirement readiness in the U.S. and how reducing choice could improve success rates.

Episode Notes

Our guest on the podcast today is Mark Miller, a nationally recognized expert on trends in retirement and aging. Miller's work considers retirement holistically, including healthcare and Medicare, Social Security, retirement investing, midlife careers, and housing. Miller is a regular contributor to, and he also writes about retirement matters for Reuters, The New York Times, and In addition, Miller has written several books, including The Hard Times Guide to Retirement Security and his most recent book, Jolt: Stories of Trauma and Transformation.

Background Information

Related Links

State of Retirement Preparedness in U.S.

The State of Work for Older Adults

Fixing Retirement at an Individual Level

Social Security

Healthcare for Retirees

Episode Transcription

Jeff Ptak: Hi, and welcome to The Long View. I'm Jeff Ptak, global director of manager research for Morningstar Research Services.

Christine Benz: And I'm Christine Benz, director of personal finance for Morningstar.

Ptak: Our guest on the podcast today is Mark Miller, a nationally recognized expert on trends in retirement and aging. Mark's work considers retirement holistically, including healthcare and Medicare, Social Security, retirement investing, midlife careers, and housing. Mark is a regular contributor of, and he also writes about retirement matters for Reuters, The New York Times, and Mark has also written several books, including The Hard Times Guide to Retirement Security, and his most recent book, Jolt: Stories of Trauma and Transformation. Additionally, Mark has his own podcast and newsletter, both of which are called RetirementRevised.

Mark, welcome to The Long View.

Mark Miller: Thanks so much. Glad to be here.

Ptak: So, maybe before we talk about whether there is a looming retirement crisis, which is a debate that continues to rage, maybe sort of a good baseline place to start is talking about how we even measure that. Are there particular data points that you would look at in making an assessment of the overall state of retirement readiness, before we get to the conclusion part of that, what do you look at?

Miller: Well, I think a great way to look at it is retirement income, just how much income are people able to replace in retirement? I think that's a simple measure, whether that's coming from Social Security or a pension or saving. I think that's a very simple way to just say, "Are people going to have enough to get along in retirement?"

Benz: So, when you look at that data, focusing on that data point, what do you see, because we've had some people, including on this podcast, who have said, well, it's not that much worse going forward than it was in past decades, that people are in OK shape. What's your vantage point on that?

Miller: I find it hard to generalize. I dislike the term retirement crisis because I think it implies, sort of a looming wall we're going to hit, an immediacy, like an event. And I don't think it is that. I think it's a rolling situation. I think it varies tremendously, depending which demographic group you're looking at, you can do it generationally or otherwise. But I think it is fair to say that you've got probably about a third of households, give or take, that are going to be just fine in retirement, between probably high Social Security payments, maybe a defined-benefit pension, and high savings. And then, you've got another two thirds that are--lots of them are going to be living only on Social Security, which typically replaces 40%-ish of income. So, that implies a sharp drop. At least maybe there are two Social Security payments coming with that household for a married couple. So, that's pretty good. But I worry about households that are going to just be living on Social Security. So, I think it's a very much of a mixed bag in terms of readiness.

Benz: So, let's tackle it generationally, starting with the older cohort of retirees today, the so-called silent generation. That group were pretty good savers, right? How did they fare in terms of their retirements?

Miller: Again, with the caveat that I think it's difficult to generalize, but I think if you want to look at that generation, they are better off than succeeding generations simply because they're more likely to have a defined-benefit pension. They benefited from years and years of runup in the real estate market. Boomers have, too, I think. They are not experiencing the cuts in Social Security that were set in motion in 1983. And we can discuss that in more detail, if you like. Probably more likely to have a defined-benefit pension. So, I think as a generation, they're better off, and I think basically it kind of goes downhill from there incrementally. Again, I split boomers into two groups, the older and the younger segment.

Benz: OK.

Miller: The older boomers are probably more like silence from this perspective. They share a lot of the same characteristics that I just mentioned.

Benz: So, they have pension.

Miller: Again, more likely to. I think it's a misnomer out there that defined-benefit pensions don't exist anymore. It's just false. These older cohorts are more likely to have them. And even though most corporations have frozen their plans, that doesn't mean that they're not still paying out benefits to people who were promised them over the years. So, that's a very slow-moving decline. And it's one of the reasons why younger cohorts are, I think, facing more challenges, because defined-benefit pensions along with Social Security have been well demonstrated to do the best job of providing retirement security. Full stop.

Benz: So, older boomers in better shape, let's talk about the younger boomers.

Miller: Yeah, probably a bit less likely to have a DB pension, are going to be hit to some extent by the cuts in Social Security that were put in motion in ’83. And I think saving is a varying story. Some have saved very well. I would put that one-third, two-third measure on to that. One-third are probably just fine from a savings standpoint. Boomers, as I mentioned, also have done pretty well in the real estate market. They were buying before the big runups started.

Benz: How about the younger cohorts than the Gen X and millennials.

Miller: That's where it starts to get dicier. So, in 1983, Social Security reforms were put in place. They started this slow-moving increase in the retirement age from 65 to 67. And those are fully in place in, I believe, it's 2022. And so, the younger you go, the more impacted you are by that. And it's oftentimes not understood that higher retirement ages are in fact a benefit cut. The way it often gets discussed is, we're all living longer. Therefore, it only makes sense to raise the Social Security age. Well, not everybody is living longer, first off. But second, what raising the age does is raises the bar of what it takes to get a full benefit. So, by the time this is fully phased in, filing at 65 will be about 13% less valuable than it was before the changes began is an easy way to put it. So, it's like a 13% benefit cut between the 65 to 67. That's pretty significant. So, Gen Xers, millennials, and successive generations will be increasingly affected by those cuts as they come into retirement. So, I think that's a big concern.

They are very much less likely to have a defined-benefit pension coming. Real estate, young folks today coming into that market that's already run up quite a bit. You look at student debt, and the problems that people are having with student debt. So, I think you look at the big macro picture and I think the younger down you go, it's more challenging. I don't buy into this idea that, oh, young people don't care about this stuff, they're not paying attention to it. I don't think that's right at all. You look at the FIRE movement, for example. Now granted, that's maybe kind of a niche movement.

Benz: Kind of maybe a rarefied subset, right?

Miller: But nonetheless, there's this group of people that are obsessed with saving, good on them. I don't notice this among millennials--my kids are in that cohort, and I talk to them and their friends all the time about this stuff. And they ask me about it, you know, what do I do about retirement? What should I be doing? And they're interested, they want to do the right thing. I just think younger cohorts are going to have a bigger hill to climb in a lot of ways.

Ptak: We've talked about this generationally, but maybe another way to look at it is male versus female and particularly looking at single women, perhaps they were widowed, and it seems like that's a particularly at-risk cohort. And so, the question is, why is that? Is it better or worse for single women baby boomers than perhaps it was for silent-generation women? Is that a noticeable trend as well?

Miller: So, a fundamental thing is that women still tend to spend more years out of the workforce, and so that reverberates in all kinds of ways. They're out for caregiving purposes typically, whether it's for kids or elderly parents. So, that spills over into all the things we've been talking about. You accrue less Social Security credit, you probably are saving less for retirement, you might have less liquid saving, which is another, I think, critical issue out there. Women tend to live longer than men. So, you're looking at less resources stretched over a more time. You asked about single versus married. Sure. I mean, for married couples, Social Security has all kinds of nifty features in there that can boost household benefits--the spousal benefit, the survivor benefit. If you're single, you're on your own record, your own earning record. So, yes, I think it's probably more challenging for single women. But I'm sure you've discussed on your podcast before, there's a lot of just general underlying infrastructure differences for women as opposed to men, if I could put it that way.

Benz: What would some of those be?

Miller: Well, I do think it's the earnings gap, and I think it's the years out of the workforce. Again, I don't buy this idea that women are somehow less focused on these issues. I'm very skeptical about all those. I'm always skeptical about finger-pointing.

Benz: Right.

Miller: I look really hard at those ideas that, "Oh, if only people took the time to understand these things better and focused on it more and paid more attention." I'm just like, I don't think so.

Benz: So, it doesn't sound like you'd think that women investing too conservatively has had a big role in this?

Miller: Well, they might be right about that.

Benz: One comment I sometimes hear in relation to retirement adequacy is the fact that people's spending tends to trend down as they age. And so, the question is, do we know that that is by choice or is it out of necessity? I guess, how do you unpack that question? Do you think that argues for the fact that people will have enough in retirement knowing that they will spend less later on?

Miller: Yeah, I think there's some good research out there suggesting that discretionary spending tends to fall with age. There's the early years of retirement--people tend to travel and do a lot of entertaining and all the rest. As their health starts to fail, they pull in their horns. They're not doing as much of that. But then, of course, is the other end of the risk, which is healthcare spending starts to rise. So, it can be U-shaped. We're probably there talking more about the affluent households that have choices, right?

Benz: Right.

Miller: So, it's not a straight line. David Blanchett has demonstrated that pretty well in his research. Others, Wade Pfau, have done really good work on that saying that this whole idea if you just draw a straight line of spending is probably not right.

Ptak: So, maybe to put this into a broader historical context, we've talked about some of the distinctions in readiness, let's call it between people of a certain age or characteristic. But if we were to maybe back up a decade, two decades and have the same sort of conversation, and let's imagine ourselves doing that, do we imagine that the conversation would have sounded a lot different in that if the things have truly eroded in terms of retirement readiness?

Miller: Well, to the extent that we've moved from this more automatic system to a much more self-driven system, yes.

I mean, I think two of the things that are terrific about Social Security and defined-benefit pensions is that they are so automatic, and they work in the background. And I don't think there's any debating that those are the most successful sources of retirement asset. I mean, Social Security, most people are hardly even aware that they're paying into it. I remember, during the Great Recession, there was a payroll tax holiday--I forgot if it was a year or two years--where they stopped collecting because a way to stimulate the economy. And a survey was done after the taxes went back into place and most people were not aware that they had stopped being collected and they were not aware that they had started being collected again. So, it's just one of those things that goes on in the background.

Now, you can argue that the filing side of Social Security is not quite so automatic because you have these interesting decisions you can make about when to claim and all the rest. But I would argue that's still a lot less complicated than, say, the world of investing. And the same with defined-benefit pension. The employer is contributing to it; you don't even have to really think much about it; you get to retirement and your checks start. This whole idea of self-directed retirement, this is the experiment we've been running and living in since the ’80s really. And as we have been discussing, it's had really mixed results. Some people are great at it, really roll up their sleeves, love it, getting into this stuff. But I think it's a relatively small part of the population. And we see the efforts to make even that side more automatic produce results--automatic enrollment, automatic escalation, target-date funds. Those things seem to produce good results.

So, the message to me is, people writ large are not interested in this stuff, not capable of getting their heads around it--I'm talking about the investing stuff--and not going to do it. And then you have the issue of forcing people to think about what they're going to be doing decades in the future. From a behavioral standpoint, it is so difficult. It just plays out in all kinds of ways. Christine, we've talked many times about long-term care, and how you can't get people to think about that stuff. I think saving …

Benz: It's unpleasant, right?

Miller: Yeah. Saving can be the same way. Immediate needs are front and center. I'm worried about raising my kids, maybe I'm thinking about saving for their college, paying the mortgage, what am I doing about my student debt. There's a lot of stuff that's right in front of people. The data about the lack of liquid savings, people living paycheck to paycheck, and we want to come along and talk to them about the importance of retirement saving. It's a tough haul. So, I'm one who is in favor of a more automated and, yes, even paternalistic system. And I know that gets into areas of ideology and this whole notion of we worship at the altar of choice, and people need to have choices. And yeah, I guess, that's right. But isn't the evidence pretty clear that in many cases, less choice is producing better outcomes? Like the Federal Thrift Savings Program, which has five choices on the menu.

Benz: And target-date options or lifecycle options.

Miller: Yeah. So, I'm really skeptical about that whole ideology of choice.

Benz: Mark, one trend that you follow closely in your work is older adults working longer, in some cases, well past retirement age. So, let's talk about the key factors driving that trend.


Benz: Longer life expectancies, better health, financial need due to the ebbing away of pensions, all of the above. Let's talk about the underlying factors.

Miller: Sure. Well, I think those are the factors. I think there's been a lot of messaging around the importance working longer. People like me have been writing about it now for 10 or 15 years, and you hear about this all the time. And there's a lot of people out there who are just convinced that they'll never retire. So, I am a believer that working longer can be a great strategy if you can pull it off.

Benz: You always call it an aspiration but not a plan.

Miller: Yeah, I mean, look, it's a no-brainer in this sense. If it enables you to delay filing for Social Security and getting those delayed retirement credits, if it enables you to save more, if it enables you to live off of wage income rather than drawing down savings for even a few years, it's like the biggest inflexion point out there that you can make for people. So, it's great to do. The problem is that it's risky as a strategy. The studies show that about 37% of workers retire earlier than they planned, either through job loss or it could be a health problem.

Or actually, one thing that's interesting is that the study that I'm referencing here from the Center on Retirement Research at Boston College. I talked to the researchers about their findings, those are the two that always come up: job loss and health. The researchers actually said to me, "You know, a lot of the people who did this, it was much harder to pin down what the reason was." Were they just bored, were they just ready for something different, they wanted to be with the [grandchildren]--sort of more ineffable reasons that they gave up on working? So, if 37% are retiring earlier than they planned and the odds of reaching the goal are lower, the more ambitious the goal. So, if I plan to work till 70, I'm much less likely to reach that than if my goal is to work to 66.

So, it's a risky plan. So, when I have people saying to me, "Oh, I don't have anything saved, but I'll be OK, because I just plan to work forever." I say, well, you know, your chances of doing that aren't really that high. So, that's what worries me about it. Then you say, well, you need a Plan B, and the answer is, they aren't all that great. Well, it's like save as much as you can. It's funny; I did a story about this for the Sunday New York Times "Retiring" column a couple months ago, and that was the suggestion as far as a Plan B. It's like, save as much as you can. And the comments from readers really were all over me for that: "What do you mean telling me to save? I'm struggling with A, B, C, D, and E. I can't do that." So, there's a lot of anger out there about a lot of these issues. And so, I don't know what else to say. What is a Plan B if you haven't saved?

Benz: Right. What did the data say, Mark? You talked about some of the financial benefits of sticking it out in the workforce longer. Are there any other benefits that we're able to quantify? Or is it just sort of inextricably intertwined that if you're healthy, you're more likely to be able to continue to work?

Miller: Well, staying engaged is good for people. I think it's good for their health, their mental well-being--feeling a sense of purpose. I think there's all kinds of intangible benefits to it. But the financial benefits are really pretty impressive. I mean, just take Social Security and the benefit of a delayed filing. So, to review the bidding right now, the full retirement age is 66, that's when you're entitled to 100% of your benefit. And for every additional 12 months you wait, that's about 8% additional monthly income up to age 70, when the additional credits are no longer available. So, what you're buying is 8% more of inflation-adjusted income.

I just finished the piece that hasn't quite run yet about inflation and talking about how this is sort of an underappreciated risk out there, because we've been living with such low inflation for such a long time. But even inflation of 2% or 3% compounds out to a pretty noticeable drop in spending power. And if inflation starts to spike up at some point, which the Fed seems to maybe be a little worried about right now, it gets to be an even bigger deal. So, I think the cost-of-living adjustment and Social Security is kind of an underappreciated feature of the program. It's really the only inflation hedge out there. There's literally one CPI-adjusted annuity provider out there, the Principal. They're the only ones offering something that's CPI-adjusted on annuities. You can buy a flat-rate-increase SPIA, pick your number, 1% …

Benz: Single premium immediate annuity.

Miller: But that's not exactly an inflation hedge, it's just kind of a guess, right? Stocks aren't literally an inflation hedge. They over time can kind of keep you even or ahead, but they're actually not correlated with inflation short term. So, they're not inflation-hedged literally. So, Social Security is the inflation protection out there. So, back to where we were, I don't know where else you could buy an inflation-protected annuity, if you will, at that price by delaying your filing for a couple of years. What's the cost? The cost is either drawing down savings to live or using wage income to live, as we're discussing. That, to me, is a great strategy of buying inflation protection and higher income in retirement.

Benz: But delaying isn't the right strategy for everyone, right?

Miller: No, of course not, and thanks for saying that. I think it's always an important thing to say. There can be lots of reasons to file earlier. You need the income, or you have reason to think your life expectancy won't be that good.

Benz: Right.

Miller: Having said that, I think one trap people fall into is this kind of break-even analysis on Social Security. A lot of people like to think about Social Security from the break-even standpoint. And to me, not the best way to think about it. I'd rather encourage people to think about the longevity insurance aspect of it. And most of us don't know how long we'll live. And so, to say, well, I'm only going live to 78. So, therefore, I'm going to file early and get my money out. Yeah, you might live to 85 or 90, or your spouse might live to 95 or 100 and receive the survivor benefits. So, I prefer that, but I get asked the question about break-even a lot. So, I answer it, but I don't think it's the preferred way to do it.

Benz: Another comment I sometimes hear is, well, I'm concerned about Social Security solvency. So, I'm getting mine while I can, even if it's at 62 at a greatly reduced benefit.

Miller: It's a big one. It's really big. I think it's the biggest question people ask me about Social Security is will it be there for me in the future.

Benz: Right.

Miller: So, here's how I look at that. Social Security is facing a shortfall. We're on course to have the trust funds for the retirement and disability programs that are usually looked at combined. Those trust funds will be exhausted in 2035, according to the latest projection. Think of the trust funds as sort of the access in the checking account. All the money that comes into Social Security goes into the trust funds and then they pay benefits out of it. So, there's a lot of in-go, out-go there. And the excess--there's an almost $3 trillion in reserves right now in the trust funds. We were starting to draw it down as the boomer retirement wave accelerates, and for some other reasons. One key reason is that we've seen softness in wage growth, we've seen more income escaping, the cap on the amount of wages subject to taxation. And probably another really critical reason is the change in the ratio of younger people coming in as workers to older people retiring. So, the drop in fertility rates in the U.S. plays a role there as well.

When we get to 2035 and that trust fund is exhausted, that's the point at which Social Security would only pay out 80% of promised or scheduled benefits. So, it's basically an across the board 20% cut benefits. It'd be a total disaster. I mean, the way I look at this is, I think the chances of reaching that point are slim to none. And it's a very simple reason. You look at the popularity of Social Security across the board in the United States, the support for the program by the public is really strong. Politicians know this. Members of Congress know this. I cannot imagine a member of Congress wanting to go back to his or her district at that point and explain the 20% cut in Social Security benefits. So, something's going to get done to avert that.

The questions are, when will we get to it, and what do we do? Now, oftentimes, you'll hear a comment made, well, Congress isn't focused on this. Nobody is even talking about it. We got to get Congress focused on it. The reality, I like to point out, is that there is a very credible solid piece of legislation under consideration in the House right now. It doesn't have a chance of passing the Republican-controlled Senate or being signed by the president. But nonetheless, there's a bill on the table that just got its first full hearing in the House Ways and Means Committee--I understand it's going to get a vote on the floor of the House this fall--that puts the program back into 75-year actuarial balance. By law, Social Security is required to project its finances 75 years in the future, which is kind of crazy if you think about it. It's getting interesting, what other program of this type would be projecting, but that's what the law says. So, that's what we do.

This bill would put the program back on track, and even provide some modest expansion of benefits, mostly for lower-income households. And it does it by raising the payroll tax rate, one tenth of 1% per year for, I think, it's 15 years. And then, it also adds a new layer of tax, very high-income households, households with ordinary income over $400,000 would start paying payroll tax rates again on income over $400,000. So, almost a donut hole.

As I was mentioning earlier, that survey about how people never even noticed when taxes weren't collected, and when they started up again. I mean, nobody is going to notice a one tenth of 1% increase in what they're paying into the system, and they're paying in for their own futures. So, this is a good bill. I mean, I hope that something like this is what we'll do, and the alternative is to cut benefits or to do some mix of new taxes and benefit cuts. But I hope we don't cut benefits, because as we've been discussing, there's lots and lots of households that are on thin ice with retirement to start with. Social Security is a modest benefit to start with. And I don't think we should be cutting it.

Now, you'll hear people say, "Well, rich people don't need Social Security. Warren Buffett doesn't need Social Security." And that's true. Warren Buffett doesn't need Social Security. But how many Warren Buffetts are there? So, even if you said, let's not pay benefits out to rich people like Warren Buffett, it doesn't have any meaningful impact on the program's finances. There just aren't enough of those folks. And I would argue forcefully that for mass-affluent households, Social Security is a really important source of retirement income. Ask any financial planner, what happens when they pull Social Security out of the plan for their clients, and it's not pretty.

Benz: Yeah, Mark Balasa, the financial planner here in Chicago, once joked he pulled it out for clients, and they were, like, OK, yeah, put it back in.

Miller: Right. I remember him saying that at one of the Morningstar Conferences, and I was laughing, and said yeah, it is really ugly.

Benz: But from a planning standpoint, Mark, how should people who are maybe 20, 30 years from retirement, think about this? If you are a higher-income household, is it reasonable to haircut your benefit by what 20%, 30% in expectation that there might be some adjustment?

Miller: You mean, if you don't buy the Mark Miller line that it's not going to happen, the cuts aren't going to happen?

Benz: Well, if I just want to be cautious.

Miller: Yeah. Sure. Yeah, you can do that. But you've just made your hill steeper and more difficult to climb. You can do that.

Benz: In terms of my saving?

Ptak: But when a reader is asking you for advice like, you know, how should I approach this if I'm really not convinced, what would you advise them?<

Miller: I mean, if they really push back after I've given my song and dance about Congress, I'd say, yeah, OK, you know, hedge your bets a little bit. It can’t hurt, right? You're just being conservative.

Ptak: And so, then the conversation becomes, OK, you got to save a little bit more.

Miller: Yeah.

Ptak: You got to work a little bit longer.

Miller: Exactly. Exactly. I mean, there's no free lunch there. So, if want to shave your Social Security--you want to do it with the assumption that it only starts in 2035, right? Not a simple exercise, because you'd have to project out your benefit to that point with the COLAs [cost-of-living adjustments], and then start assuming some cuts. The further out you get in the future, it gets a little harder.

Ptak: Right.

Miller: Yeah, I don't have any problem with it if people are that convinced that Congress is going to allow a 20% cut in Social Security benefits. Predicting the future is always hard the further out you get down the road. I just don't see it happening.

Ptak: Yeah.

Benz: Mark, before we leave the topic of working longer, I'd like to discuss what the job market is like for older adults? Age discrimination is a thing. Can you talk about what the landscape is like for people who are wishing and able to stick it out past what in the past we thought of as kind of traditional retirement age?

Miller: I think it's widely acknowledged that age discrimination is still a thing. Legal protections for it have eroded, if anything. You hear the stories all the time from people not just in their 60s but at younger ages, too--depends on the industry, like Silicon Valley is sort of notorious for this, you're old at 40. So, age discrimination is certainly an issue. Some of the people I know, colleagues of mine and journalists who write in this field, are a little more optimistic about this than I am, pointing to signs of employers starting to do more to accommodate older workers with things like flexible scheduling and the like. And I think you can find examples of that. But when you step back and look at the macro level of this, I think it can still be challenging. You have to look at age discrimination. Two sides of that coin is, one is security if you have a job, the other is job-hunting. And both are challenging. You hear all the time from workers who have lost jobs and just can't get a hearing. And again, going back to this idea of relying on working longer as a retirement plan, this is one of the main problems I have with it.

Benz: I remember one thing you wrote about for us in the wake of the financial crisis was just sort of how job prospects looked for older adults during that period. I think, correct me if I'm wrong, but the takeaway was that older adults kept their jobs at a higher rate than younger subsets, but when they lost them, it took them much longer to replace them.

Miller: Right. I mean, it's better now with the labor market being so much tighter than it was. I keep waiting, though, to see the evidence of a big sea-change in demand for older workers. And I haven't seen it. And the unemployment rates for older workers actually are about a point lower than the general unemployment rate. And there's a variety of reasons for that. That's always been--as long as I've been tracking this--it's always been the case. But then when you look at the average time out of work, that's where you kind of see this. It's much higher for older workers than it is for younger. It's just much harder to get re-employed.

Benz: Right. One ongoing debate in the retirement-planning community is what length of retirement to plan for. I had Joel Dickson and Maria Bruno from Vanguard on a couple of weeks ago. And Joel argued that using the 30-year horizon for everyone and in every situation does pre-retirees kind of a disservice that it could encourage oversaving and underspending. What's your take on that question? Time horizon in retirement, how should people plan?

Miller: Yeah. I get the argument about planning to 100, because it's sort of a nice conservative number that I think a lot of planners like for that reason. But I think it needs to be framed the right way. Like, when I talk with our planner, she's always pushing us towards the edge of very conservative assumptions. And as long as I understand that they're very conservative assumptions, that's OK, because then I say, well, you know, I'm actually probably a little ahead of where this looks.

The flip side is, I mean, you cut the assumption from, what, 100 to 85. I mean, a lot of people are going to make it past 85, so I think you do a disservice there. So, I understand those concerns, but I don't fundamentally have a big problem with a conservative number so long as it's couched and understood properly. Again, we're talking about people who have relationships with planners. That's a relatively small part of the population. So, one concern here would be if somebody is using an online tool and just plugging in numbers, do they understand what's being spit back at them properly?

Benz: Speaking of online tools, are there any that you really like for forecasting retirement readiness?

Miller: Well, there's some that I like for Social Security in particular.

Benz: What are those?

Miller: Social Security Solutions has a nice set of online tools, pretty easy to use. The Social Security website has a lot of really useful tools as well. I haven’t run into all that much that I think is sort of a single holistic tool for doing your plan online that I have said, "Yeah, this is the thing." I really haven't run across that.

Benz: How about life expectancy calculators? Do you like any of those?

Miller: Yeah, there's one that the Society of Actuaries has that's good, because it's quite simple. They just ask you to plug in two or three data points, and it comes back and says, here's your range. The folks at the SOA, Society of Actuaries, argue, I think persuasively, that these more complex online tools are kind of doing a disservice because they give people a sense that they're giving more certainty about life expectancy than perhaps is really possible.

Ptak: So, if you use these tools and you realize that you're facing a shortfall, what do you think somebody should do? I realize that counsel can vary depending on sort of where they are and sort of their circumstances. But, I mean, are there a common set of vectors or considerations for those folks?

Miller: Well, I think two sides of the equation: one we've already explored it in some depth, which is strategies like working longer, delayed Social Security, saving more. There's the catch-up contribution allowances, which if you're in a position to do that I think are great. Health savings accounts, if you have access to one, and again, if you're in a financial position at this late point to sock some money into that, great. I think an ideal thing with an HSA is if you can max it out and then not use it in a given year to meet your healthcare, you've really done yourself a favor. But again, I think it's a relatively small number of households that are financially positioned to do that stuff.

Benz: Let's just quick walk through the tax benefits of the HSA, why they're so attractive, because it does seem like people like you really love HSAs above any of the other retirement savings vehicles because the tax benefits are the greatest.

Miller: Well, let me clarify it. I don't love HSAs above all other.

Benz: OK.

Miller: Number one, I think, and Morningstar research has shown this, they're kind of mediocre as investment platforms, right?

Benz: Some can be.

Miller: Some can be. The tax benefits, let's just stipulate are, unmatched, right?

Benz: Right.

Miller: It's basically you put the money in pretax, and as long as you use it for healthcare need, it doesn't get taxed. Hard to argue that that's not a great thing. Most households, though, are not going to--there's a relatively small number of households that are using them, so far, in the way that I just suggested, because they can't. I mean, you put the money in, and you wind up using it for a healthcare need in the current year. So, as a saving vehicle, I don't think we've seen a lot of evidence yet that they're a great vehicle, with the exception of very high-income households. They can afford to max out the HSA and then not touch it.

Benz: Right.

Miller: So, to me, the 401(k), the Roth, the IRA are just more every person's retirement vehicle, still. But yeah, HSA, if you have the resources, there's no doubt that that's a great additional opportunity, but I would never say that I love it above all else. And the other thing that worries me about HSAs, very much so, is that it just adds this additional layer of complexity to the workplace environment. I think a lot of employers don't even understand the ins and outs of these things.

Quick personal story. So, I'm on my wife's employer's health plan and last year for the first time, they introduced a high-deductible insurance plan, coupled with an HSA option, and we went over it with our planner who said, yeah, let's do that. So, we're doing what I said, we're putting the money in there and try not to use it. But in the meantime, when she goes to sign up for this thing--now my wife is 65 at the time--the HR department at her employer came back and said, “Oh, you can't contribute to an HSA because you're 65.” And she reports this back to me, and I said, no, tell them that's wrong. It's true that you cannot continue to contribute to an HSA once you go on Medicare. But she was not going on Medicare. She's still working, and the one reason you can delay going on Medicare with no problem of a late penalty is if you're still working full time and have insurance at work, and that was her situation. You need to stop contributing to the HSA six months before you go on Medicare, because of the lookback and Part A. This is a good example of why this stuff is so … it's ridiculous how complicated some of this stuff is.

Now, just put that aside for a sec. So, we straightened that out. And I send in two or three articles I've done on this to her HR department, which they promptly ignored. But nonetheless, we got it straightened out. So, they're introducing this benefit they don't even understand, OK?

Now, put that off to the side and think about the challenges that are going on in the workplace with just getting people to use the 401(k) to its best advantage. What kind of uptake has there been for the Roth(k)? Poor, right?

Benz: It's getting better.

Miller: OK. Lots of employers have added it but not that many people are using it. I'm just saying there's so much complexity in this environment already. Now we're adding more. Is it really necessary? I can think of better ways to skin that cat.

Benz: Yeah.

Miller: I don't even know how we got off in all that, but I gave my rant on HSAs …

Benz: We're talking about ways to play catch-up if you're running behind.

Miller: All right. So, that's one side of the equation, save more. The other side, I think, that's really important is to give some creative thought to the spending side. So, if you really have reached the point where you say, "Oh, gosh, I got close to retirement, I didn't do what I needed to do." There are ways to re-engineer the cost side. Can you extract equity from your home, move to something less expensive? You really scrub the expense side. I think it's often overlooked. I've done a few articles over the years about ways to save lots of money by moving. Let's say, you live in an expensive metro market--New York, Chicago, Washington--you need to be close to where you're working. When you retire, that need to be close to your income source is not as strong. Could you move somewhere? I did a story a number of years ago about people who just didn't want to leave their city they're living in, because that's where their friends, their family are.

Benz: Right.

Miller: But they moved to the edge of the metro area, maybe still on a train line that lets them get into the city conveniently, but chop their living expenses in half, took a bunch of equity out of maybe an expensive home in a central part of the city. So, there are creative things one can do to scale back spending. And so, that's the other thing that I would urge people to think about.

Benz: I want to talk a little bit more about spending, because I think people can use it as a lever. But let's talk about the categories, what you see when you look at spending trends in retirement. What stuff do people spend more money on in retirement than they did when they were working? And the opposite, what do they spend less on in retirement than when they were working?

Miller: Yeah. Well, it's more on healthcare.

Benz: Yes. And is that later in life or consistently through?

Miller: It tends to be later. I mean, probably weighted by near-end-of-life, intense expenditures or a long-term care need. But health expenses go up. Some things go down. You're not spending money on things like lunches during the work week and work clothing and commuting costs go down. There's a whole variety of things that can drop. We talked earlier about--so, you have the discretionary bucket and nondiscretionary, and the nondiscretionary is your housing, utilities, food, transportation. The Senior Citizens League does an annual study where they have like a market basket of goods that seniors purchase. It's a nondiscretionary bucket. It's all this stuff like your home heating and your food and rent or property tax. They find that seniors have lost like 30% of their purchasing power over the last couple of decades, just on the nondiscretionary stuff. That feeds into this whole argument about inflation and whether the Consumer Price Index does a good enough job of measuring the inflation that people are seeing.

Benz: Right.

Miller: So, it's concerning.

Benz: Inflation hits older adults harder because of that healthcare component?

Miller: Healthcare component and fixed income at that point, and erosion of purchasing power. Arguably, the cost-of-living adjustment in Social Security is not even adequate to that because of healthcare and some of these others. And then you have other sources that are not inflation-protected at all. So, if you're lucky enough to have a defined-benefit pension, it's declining and its purchasing power is declining every year.

Benz: Some of the public sector pensions, I think, have inflation adjustments.

Miller: Yes, some do. Thank you. Good point.

Ptak: So, to counteract some of that, a tool it seems that some planners/advisors would recommend and perhaps you've recommended in interacting with users is an annuity. And so, are there a set of circumstances or fact pattern where you think it's more appropriate for somebody to consider using annuity and conversely others where it just doesn't make a lot of sense to pull that out of the bag?

Miller: Yeah. Well, one worry about annuities is they're nominal, they're not inflation-adjusted. So, that's a concern. I've seen some interesting writing about that back and forth lately from some retirement researchers--and I think David Blanchett was part of this, too--who have some online articles about does it make sense, the additional cost of buying inflation protection in an annuity? And I think Blanchett's point was it's way too expensive. And others were saying, well, it can make sense, depends what your view of inflation is. But all this is kind of a "how many angels dance on the head of a pin" kind of an argument because the fact is annuities remain such a small part of the overall retirement landscape. People don't want them, generally speaking.

Benz: Why is that?

Miller: I think people are really leery about handing over a big chunk of money for an uncertain return. I think it's that basic. And you can argue till you're blue in the face about longevity protection and how it can be beneficial. And I think there can be situations where it's beneficial. But to me, it's a lot like the difficulty of getting people to delay Social Security, and most people don't delay Social Security. A bulk of people file below their retirement age or at it. And it's just another example of human behavior, just how we are wired. You know, show me the money now, and I don't want to give up control.

So, it's a struggle. Some categories of annuities are showing some growth, kind of these fixed-rate instruments, but at the same time others are going down. So, the market I think, overall, is kind of flat, and it's a speck compared to the 401(k). You look at all assets in 401(k)s and IRAs and then compare that to all assets in annuities and it's not even a comparison.

Benz: So, speaking of 401(k)s, there was that SECURE Act that I believe passed through the House that would allow company retirement plans to offer annuities. That's been a contentious thing.

Miller: Yes.

Benz: First, let's talk about what that would mean. It seems like it's a little unclear about what type of annuities, but also what's your take on offering annuities in that context or maybe even like auto-opting people into them at some point.

Miller: Sure. So, the legislation would create a safe-harbor provision for the employer to protect them against the risk that an annuity provider that they bring into the plan goes out of business, you know, goes belly up down the road. So, there is kind of an arm's length safe harbor. That's the big thing that's in there to try to encourage employers to add these things. Most people I talked to about it are skeptical that we'll see widespread adoption of that. I think there will probably be some. But I think, to me, it's similar to what we were discussing a minute ago about the already complex environment. We've got 401(k), now HSA, and you know, we now have this new wrinkle of converting to an annuity. It will be interesting to watch, but I don't think it's going to be a big revolutionary change. Nobody in the annuity business is saying this is going to just change things overnight. And there are some big players in this business who just continue to feel like there is just no good rationale for doing it in the workplace as opposed to retail. Vanguard feels that way, I know.

I would say, you know, I think the workplace is where the rubber meets the road for so many people. So, it's where you can get some focus and you can get some level of some advice to the person approaching retirement. So, I think there is always some value in focusing on what's going on in the workplace. So, I'm always interested in that, but I'm kind of skeptical the annuities are going to suddenly take off in the workplace retirement plans, if this becomes law, which I think it will.

Benz: One topic that you've hit on a few times is just how complicated all this is, this process of retirement decumulation, especially as it relates to the investment portfolio. So, what are your best ideas in terms of simplifying this whole thing to make it easier for people?

Miller: Yeah, I always tell people to--this is not revolutionary advice, but I'm a big believer in low-cost index investing, automation, target-date fund. It's amazing to me, as much as people like you, Christine, or me talk till we're blue in the face about these ideas, how many people just have not gotten the message. Having a conversation just last week, I was on a long drive with a really good old friend of mine, who was telling me about this great investment advisory he has got, you know, it's a traditional actively managed philosophy at work there. And he says, well, he just doesn't--oh, he just doesn't believe in these index funds. I said, well, of course, he doesn't believe in these index funds, because that's like killing his business. And you know, there is a reason why Vanguard is sort of eating this business alive. And so, I said, well, tell me about what kind of returns you're getting. And he says, oh, it's been really great, we're getting you know X to Y every year. I said, is that after expenses? Oh, I don't know, I'm not sure about that. So, how much is he charging you? Oh, I really don't know. So, you know, there is just kind of a comfort level that some people they like their advisor, right? I just trust, Joe, he has been great for me over the years. He takes me out to play golf every year, to which I often say that's the most expensive round of golf you will play this year.

So, I think just more people need to get the message on the importance of keeping costs rock-bottom, contribute regularly, start early. You know, young people ask me about this. If you start early, this is like the best thing you can do for yourself. Even if it's a very small amount of money into an inexpensive Roth IRA, let's say, target-date fund, $1,000 a year starting in your 20s, you'll be so glad you did that with compounding in the out years. There has been some good research showing that that's like, bigger than--how much you put in, how early you start, much bigger than investment returns or anything else.

Ptak: And so, if you were retirement king or retirement czar, you know, and maybe were focused on the retirement-planning system itself, which I think that you've quite persuasively described as highly, highly complex, very diffuse, just hard for a participant to interact with. If you could wave a wand and make some simplifications to those, I mean, what would be the key things that you would focus on?

Miller: I would be in favor of a mandatory participation, highly automated system where all employers are required to be in. There’s variations on this out there already with some of these state plans.

Ptak: Right.

Miller: There's some proposals that have been made for it at the national level, too. I think the retirement industry is increasingly seeing the wisdom of some automated mandatory thing. I think the word mandatory was just sort of poison in the wake of the passage of the Affordable Care Act, you just become this political third rail. But a lot of the folks I talk to in the industry now are coming around to the idea that, hey, something mandatory is what we need, where everybody is in, you need portability. So, when people move from job to job, it's not too complicated. All the things we know are working like automatic enrollment, auto-escalation, low cost. I think we could do ourselves a lot of good with something like that.

And then, I also am a big believer in--I would expand Social Security. I would be in favor of higher taxes going in for higher benefits across the board. Because I think with the exception of the Warren Buffetts of the world, we could all use more guaranteed income through retirement. Social Security is an efficient system, works great and we could help a lot of people with just getting more income to them that's guaranteed for life.

Ptak: We've really enjoyed this conversation, full of insights. Mark, thanks again for taking the time to be on The Long View with us.

Miller: It was a pleasure. Thanks so much, Jeff. Thanks, Christine.

Benz: Thanks, Mark.

Ptak: Thanks for joining us on The Long View. If you liked what you heard, please subscribe to and rate The Long View from Morningstar on iTunes, Google Play, Spotify or wherever you get your podcasts.

Benz: You can follow us on Twitter at Christine_Benz.

Ptak: And at Syouth1, which is, S-Y-O-U-T-H and the number 1. Finally, we'd love to get your feedback. If you have a comment or a guest idea, please email us at Until next time, thanks for joining us.

About the Podcast: The Long View is a podcast from Morningstar. Each week, hosts Christine Benz and Jeff Ptak conduct an in-depth discussion with a thought leader from the world of investing or personal finance. The podcast is produced by George Castady and Scott Halver.

About the Hosts: Christine Benz and Jeff Ptak have been analysts and commentators on investments and the investment industry for many years. Christine is Morningstar's director of personal finance and senior columnist for Jeff is head of global manager research for Morningstar Research Services, overseeing Morningstar's team of 120 manager research analysts in the U.S. and overseas.

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(Disclaimer: This recording is for informational purposes only and should not be considered investment advice. Opinions expressed are as of the date of recording. Such opinions are subject to change. The views and opinions of guests on this program are not necessarily those of Morningstar, Inc. and its affiliates. Morningstar and its affiliates are not affiliated with this guest or his or her business affiliates unless otherwise stated. Morningstar does not guarantee the accuracy, or the completeness of the data presented herein. Jeff Ptak is an employee of Morningstar Research Services LLC. Morningstar Research Services is a subsidiary of Morningstar, Inc. and is registered with and governed by the U.S. Securities and Exchange Commission. Morningstar Research Services shall not be responsible for any trading decisions, damages or other losses resulting from or related to the information, data analysis or opinions or their use. Past performance is not a guarantee of future results. All investments are subject to investment risk, including possible loss of principal. Individuals should seriously consider if an investment is suitable for them by referencing their own financial position, investment objectives and risk profile before making any investment decisions.)