It’s been said the 3-legged stool is a good representation of where your retirement income will come from. The 3 legs of the stool are social security, pension and personal savings.
History shows that 2/3’s of your retirement income came from social security and pensions and 1/3 from your personal savings.
Today we have seen a paradigm shift. Only 1/3 will come from social security and 2/3’s will come from personal savings.
This means we need to spend more time, not less time, planning for our retirement. We must make sure our personal savings will fill the gaps left behind by social security and pensions.
I’m sure you have an opinion about the future of social security, as do many people. I don’t feel it will go away, however, changes will occur. Depending on your age, you may have to wait longer to get social security and the cost of livings adjustments may continue to dwindle as more people take from the bucket.
Pensions are going by the wayside. Many pensions have been frozen or dissipated. And if you think your company pension is set in stone, think again. Your pension payout may not be as rich as it looks today.
So, what can you do?
First off, make sure you understand your social security benefits and when you will take the benefits…. at age 62, at full retirement age or age 70. Each of these choices will affect your benefits.
Do you have a pension? If so, you are one of the lucky ones. If you are married, make sure you choose the right survivorship option. If you don’t have a pension, you can still create a guaranteed paycheck from your retirement savings with an annuity.
Make sure you have a plan on when you want to retire and an idea on how much money you will need to enjoy your retirement lifestyle. Estimate your fixed and leisure expenses and make sure you have a guaranteed income stream to take care of your fixed expenses.