Financial Focus: Strengthen your 'three-legged stool' for retirement
For many years, Americans provided for their retirement needs through three sources: employer-sponsored pension plans,
To begin with, all three legs of the stool are facing challenges. Let's consider them:
Employer pensions – A generation ago, workers employed in many companies could count on a set monthly pension income to help them through their retirement years. Today, pensions – also known as defined benefit plans – are mostly found in public sector employment, as most private-sector employers have replaced their pensions with 401(k) and similar plans. These plans can be quite effective at helping build resources for retirement, but they do place most of the responsibility for saving on the employee.
Personal savings and investments – In terms of building savings and investments for retirement, the picture is somewhat mixed. The national savings rate has increased in recent years, but more than half of American workers still say their retirement savings are not where they should be, according to a 2021 survey from
You have options for improving some parts of your own three-legged stool. For example, no matter what happens to
As for a pension, you can't control what's available to you through your employer, but you can create your own retirement income stream by contributing as much as you can afford to your 401(k) or other employer-sponsored plan and by increasing your contributions whenever your salary goes up. And you can also contribute to an IRA or other investment vehicle to further boost your retirement funds. Try to leave these accounts intact until you need them for retirement. This will be easier if you've built an emergency fund, with the money kept in a liquid, low-risk account, to pay for unexpected costs, such as those resulting from a major car or home repair.
The three-legged stool may not be as universal as it once was – but you can still construct a sturdy structure to support your retirement needs in the future.
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