How Wobbly is the Retirement ‘Three-Legged Stool?’

retirement, 401k, savings

Two of the three legs ain't doing so well, or so participants think.

Americans really want to retire—until they retire.

The financial sacrifice it sometimes entails has many people anxious, according to American Institute of CPAs (AICPA).

The survey found that less than half of non-retired Americans are confident they will reach their retirement goals, compared with 49 percent who are not confident (29 percent not sure, 20 percent don’t think they ever will).

Only five percent of non-retired Americans reported that they had already reached their retirement goals.

This lack of overall confidence tracks with anxiety about the financial aspects of retirement. When Americans were asked the specific cause of their anxiety, the following was heard most often:

In addition, figuring out how much money will be required in retirement and the overall difficulty of planning for retirement are causing anxiety for a substantial percentage of non-retired Americans.

The traditional ‘three-legged stool’ model of retirement planning involves Social Security, a pension and personal savings, including 401(k) and IRAs. The survey found that, among those currently retired, the model holds up well – with these Americans citing Social Security (61 percent), pension plans (36 percent) or cash or savings accounts (25 percent) as their top two sources of income in retirement.

However, for non-retired Americans, anxiety over Social Security and a sharp decrease in company pensions may have led to an increased emphasis on personal savings – leaving the three-legged stool a bit unstable.

Overall, for non-retired Americans the percent who anticipate relying upon Social Security (48 percent) or a pension plan (17 percent) as one of their top two primary sources of income differs significantly, with a more likely dependence on cash or savings accounts (39 percent).

And non-retired Americans are more than three times as likely as those who are retired to say they expect to rely upon a 401(k) (43 percent vs. 14 percent) as one of their two primary sources of income during retirement.

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