The 'Three-Legged Stool' of Retirement is Wobbly
With traditional sources of retirement income under pressure, investors need to focus on getting the most out of their retirement savings.
Retirees have traditionally depended on a "three-legged stool" of income: their pension, Social Security, and their retirement savings. However, over the past few decades all of these have become less dependable.
Pensions are largely a thing of the past. In 1983, 62% of workers had a pension. Today only 12% of workers have a pension. And those remaining pensions are 20% underfunded.
Social Security is under great pressure. In 1945, there were 42 workers to support every beneficiary. Ten-thousand people will retire every day until 2030, and at that point there will be two workers to support every beneficiary.
Retirement savings are woefully underfunded. More than half of U.S. households do not have a retirement account. And those that do contribute on average only 3% of their income.
With pensions and Social Security largely out of investors' control, retirement-savers should focus on what they can control: their retirement savings.
Our research shows that investors can make the greatest impact by:
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