6.03.2011

Social Security - the One-Legged Stool

Lack of retirement savings makes entitlements sacrosanct

Excerpt:

Social Security and Medicare are emerging once again as seemingly untouchable third rails of politics despite their looming insolvency, and economists say the reason is obvious.

Surveys show that a majority of Americans will rely solely or mostly on the programs for support in their retirement because they have not saved adequately.

That was not the way it was supposed to be. Social Security originally was intended as a supplement to retirement income such as corporate pensions and personal savings — one leg of a so-called “three-legged stool” of retirement support.

For most Americans, however, it’s the only leg of the stool left standing because of paltry personal savings and depleted corporate pension plans, prompting people to reflexively oppose any changes in the social programs.

More than half of all workers in the United States have less than $25,000 in total savings and investments, according to Federal Reserve surveys, and the average balance for someone approaching retirement was just $78,000. That amount leaves the average retiree with about $3,100 a year or a little more than $250 per month — not enough for even basic expenses.

The average Social Security check, by contrast, is about $1,200 a month.

“Most households have no retirement plan other than Social Security, and the average American family has not saved enough to maintain its standard of living in retirement,” said David Wyss, chief economist at Standard & Poor’s Corp.

Comment: There actually is a one-legged stool (image above). Few workers have the pension leg any more. My company no longer offers pensions for new workers. I am grandfathered in so I should have something there. Better to have 4 legs: Savings, 401K, Social Security, and Investments

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