Financial advisors used to refer to retirement income as a “three-legged stool.” This meant that the stool was supported by:
- (1) Social Security benefits,
- (2) an employer pension plan or other employer-sponsored plan and
- (3) personal savings/investments. Today, retirement income is less reliable because fewer employers offer pensions, and employees have not been able to save as much due to stagnant wages and high levels of debt.
One approach to building a retirement income strategy today is to visualize it as a “four-legged stool.” This is comprised of the three components mentioned above, plus a guaranteed income annuity. To create that fourth leg, an individual may need to reposition a portion of funds from other retirement accounts. However, while the retirement stool may be shorter than in years’ past, that fourth leg can help offer a bit more stability and confidence in your retirement income plan.
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