It started with a question over lunch.
“David,” said Alexis, an HR manager for a tech company, “I keep hearing about a ‘three-legged stool’ of retirement. Is that still a thing? I mean … it sounds like something my grandfather would have said.”
I smiled. “It’s still a thing. But it’s missing a leg—and another one’s starting to crack.”
She leaned in. “Okay, I’ll bite. What are the three legs again?”
“Your income after you retired was to come from three sources: Social Security, pensions, and personal savings,” I said. “That was the standard model. But let’s take them one at a time.”
“Social Security’s still around, right?” she asked.
“For now,” I nodded. “But it’s under pressure. The full retirement age already moved to 67. And starting in the 2030s, according to most economists and actuaries, the system will lapse into insolvency. This means that benefits could be cut by 20% unless Congress steps in. And they are terrified to address the issue since that would make them a target for organizations like the AARP. Current retirees might be safe, but younger employees could see delays or smaller checks.”
Alexis frowned. “And pensions?”
“As you know, they’re mostly gone. They’ve been phased out of the private sector for decades. Too expensive. And too much liability for employers.”
Alexis tapped her iPad. “I guess that just leaves personal savings—401(k)s and IRAs.”
“Exactly. And that’s the only leg employees can actually control. That’s why saving for retirement matters more than ever. If they’re not contributing to their 401(k), they’re relying on a stool with one leg.”
Alexis looked thoughtful. “So what should I be doing as a plan sponsor?”
“Promote the plan. Emphasize the match. Offer Roth and traditional options. And give employees the tools and education they need to engage. Financial education is something that is not taught in school and it is critically important that employees are given the knowledge to ensure that they have a successful retirement This isn’t just about saving—it’s about survival in retirement.”
She nodded slowly. “Got it. I guess it’s on me to reinforce the last leg before the whole stool tips over.”