The “three-legged stool” is an old term that fi🌠nancial planners once used to describe what were the three most common sources of retirement income: Social Security, employee pensions, and personal savings. It was expecte♛d that this trio would together provide a solid financial foundation for retirement.

Times havജe changed, though, and so has the three-legged꧒ stool.

A New Leg for the Stool

For younger workers in the private sector, the pension leg has mostly been replaced. Instead of a pension (or a “defined-benefit plan”), workers now have 401(k)s and other 澳洲幸运5官方开奖结果体彩网:defined-contribution plans.

Originally, theꩲse retirement savings plans were never meant to serve as pensions. They were supposed to be supplementary savings accounts, building up the third leg of the stool. Nevertheless, ever since the 1990s, employers have been replacing the guaranteed corporate pension with these 澳洲幸运5官方开奖结果体彩网:tax-advantaged plans. Some companies will 澳洲幸运5官方开奖结果体彩网:match an employee's contribution up to a certain percentage, while others do not. The average employer match is 4.6%, while the median employer match is 4.0%.

Social Security

As for Social Security, the 2024 Annual Report of the Social Security Board of Trustees warned that the Social Security Trust Fund could face difficulties in nine years at the current rate of output: “The Old-Age and Survivors Insurance (OASI) Trust Fund will be able to pay 100% of total scheduled benefits until 2033 [...] At that time, the fund's reserves will become depleted and continuing program income will be sufficient to pay 79% of scheduled benefits."

It's unclear if this will actually happen, or if somehow, this will be fixed by 2033.

Workers can accounts to see how much in benefits they are slated to receive at early retirement (age 62), 澳洲幸运5官方开奖结果体彩网:full retirement (age 67 if you were born after 1960꧑), and age 70 (the age where there are no further incentives to delay benefits).

Personal Savings

That leaves our third leg, personal savings. Savings rates have been extremely low for U.S. workers over the last decade—recessions and stagnant wages have made it tough to put money aside. Nevertheless, with the rest of the stool looking wobbly, individuals will need to start saving a larger portion of their income and continue to utilize tax-advantaged retirement plans such as 澳洲幸运5官方开奖结果体彩网:individual retirement a꧃ccounts (IRAs) and 澳洲幸运5官方开奖结果体彩网:annuities to build their retirement nest eggs.

The Bottom Line

With pensions being replaced by retirement savings accounts, we're almost down to a two-legged stool—not something you could actually rest on securely. There are several possible solutions to prop up the Social Security leg, though the future of the program is unknown.

In the meantime, it may help to think of tax-advantaged retirement plans as the stool's second leg and work on building up the third leg with other savings, including investments such as 澳洲幸运5官方开奖结果体彩网:real estate. At this point, however, many Americans' retirement plans are as shaky as this old stool—and the metaphor itself.