What is the three-legged stool?

financial security for retirement

How are you to overcome the fact that the number of U.S. pension plans have went from 114,396 in 1985 to 29,512 in 2003? (But what if I live? The American Retirement Crisis, Gregory Salsbury, Ph. D. 2006)

Retirement income consists of three traditional sources 鈥?Social Security, personal savings and pension plans or employer-sponsored retirement plans. Understanding how these three sources work together and examining your retirement needs can help you determine if you have properly planned for your retirement. Be prepared so you won't have a retirement gap.

The three-legged stool
Today, we should give more careful attention than ever to the time-proven "three-legged stool" concept that identifies three major sources of retirement income: Social Security benefits, personal savings, and employer-sponsored retirement plans.

The three-legged stool concept holds that 15%-25% of retirement income should come from Social Security, 0%-60% from an employer-sponsored retirement plan or pension plan and any gap between the two should be filled by private savings 鈥?the third leg.

Stocks. Bonds. Real Estate.

For retirement you should be well diversified, so if any one sector gets clobbered, you won't take much of a loss.

Stocks include domestic large, mid and small caps and foreign stocks as well. Bonds include gov't and corp bonds. Real estate is generally owning your own home, and perhaps some investment properties if you can swing it.

Depends on context.

To me, I associate that with FDR's concept of Social Security. Social Security was to be the foundation on which a person could retire, augmented (ALWAYS as it was NEVER designed to be enough to retire on) with some manner of pension from a company AND personal savings.