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Why the Traditional Three-Legged Stool Model Doesn’t Work Anymore



After five years of experience leading a TPA call center in North Carolina, Andrew decided to move west to explore parts unknown and follow his passion of helping others. Walking through the doors of Ubiquity Retirement + Savings, formerly The Online 401(k) for the first time, he knew he’d found something special. Continuing to delight clients and partners alike and 10 years later, Andrew has been able to develop new teams, co-found a non-profit of strategic alliances, co-produce a hard-hitting documentary about the looming retirement crisis, and still had time to spread the savings gospel far and wide. Using social media and actual media alike (Wall Street Journal, Fox Business, PlanSponsor, and more), you’ll find no one who likes talking retirement more than this guy!


September 30, 2015 at 8:33 am
Personal Finance


Have you ever heard of the three-legged stool of retirement? Back in our parents’ and grandparents’ time, this is how the sources of retirement income were explained: Social Security, pensions and personal savings.

While this model may still be floating around in personal finance textbooks, it’s as outdated as your dad’s 1970s leisure suit. The truth of the matter is two of these three stool “legs” are not as supportive as they once were and most savers today cannot rely on them for their retirement success. To make matters worse, the remaining leg of the stool is failing people left and right because they don’t realize the other two legs don’t exist anymore.

So what happened to the stool to make it a pogo stick – and a very unstable one – for many people, particularly Gen-X and Millennials?

1.     The Future of Social Security is Not in “Our” Hands

The first leg of the stool that is no longer there is Social Security.

Younger generations might think they can rely on Social Security based on what is taken out of their paychecks each pay period, but the system is looking sparse due to the large number of baby boomers filing for Social Security in recent years.

As it stands, Social Security is projected to be insolvent by 2033. That’s the same year that babies born this year will graduate high school – so not very long at all! Ultimately, the lifespan of a supportive Social Security system is up to Congress.

2.     Company Pensions Won’t Save You

Only a few lucky individuals can look forward to receiving a pension once they retire. In fact, only one in five private sector employees have access to a defined benefit pension plan. Even successful companies such as Boeing, Clorox and Lockheed Martin have either frozen this benefit or trimmed it completely out of their budgets.

This leg has basically been nonexistent for years as more and more companies swap out a defined benefit plan in favor of a defined contribution plan – putting the onus of retirement income squarely on your shoulders.

3.     Personal Savings are Woefully Inadequate

The last – and only somewhat-reliable – leg of the stool left is personal savings.

Unfortunately, many people don’t plan accordingly for this new reality. Unlike the other two legs on the stool – which, as we already covered, are pretty much nonexistent anyway – personal savings is not something that another person or entity is responsible for providing. This is the leg of the stool that you alone must plan for.

You can only control the controllable, and that starts with your personal savings strategies. Don’t wait for the Social Security system to fix itself and employee pensions to make a comeback (Spoiler alert: That’s never happening). Your future is in YOUR hands!