Is Your Three-Legged Stool Wobbly?

Aug 9, 2021

By Theresa Fry, Senior Vice President, Manager of IRA’s, Retirement & Education Planning

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The description of the three-legged stool for retirement income has been a staple in planning for a long time. The three components or “legs” of the stool are: pensions, Social Security, and personal savings. The idea is that you need all three legs, providing equal resources for your retirement income, to keep your retirement stable. Today, however, many people may find their three-legged stool a little wobbly.


Traditional pensions used to be the poster child for retirement. You worked a long career with one employer and retired with a gold watch and pension income for life. That type of retirement – which may have been common four or five decades ago – is going the way of the dinosaur. Most people don’t work for the same employer for 30 or 40 years anymore. The U.S. Bureau of Labor Statistics data shows people change jobs on average 12 times during their career and spend less than five years at each job. Although some larger employers may still make pensions available, and governmental agencies typically provide pensions today, if you don’t have access to a pension, you are not alone.  Roughly 8 out of 10 workers don’t.[i]  If that is the case for you, your three-legged stool will be a two-legged stool.

Social Security

Many people look at Social Security as a primary source of income during retirement. The Social Security Administration indicates that half of married elderly couples and 70% of unmarried persons rely on Social Security for 50% or more of their retirement income.[ii] If you are looking to rely heavily on Social Security, keep in mind the average retirement income benefit amount in 2021 is $1,544/month, or $18,528/year. Make sure you review your Social Security benefit statement for an estimate of your future Social Security benefits. You can review it any time online, once you create your account on

Although Social Security does provide cost-of-living adjustments (COLAs) on benefit amounts, there has been much debate on whether current methods have been effective for retirees in keeping pace with inflation. For 2021, the COLA was just 1.3%.[iii]  Recently the Fair COLA for Seniors Act of 2021 was introduced in Congress. It calls for Social Security to tie the calculations to the Consumer Price Index for the Elderly (CPI-E) instead of the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). CPI-E uses the same formulas and prices as the CPI-W, but it puts more weight on expenditures of those age 62 and older, such as healthcare. If such a change were enacted, it is believed the COLA would be 0.2% higher on average. COLAs for 2022 will be announced in a few months and some are predicting a 5-6% increase in benefits next year. That would be the biggest increase in more than a decade and rising inflation is the reason.

If you aren’t sure how much of your retirement income needs can be met with this second leg of the three-legged stool, ask your financial advisor to help you compare your filing options and do some retirement income planning before you file for benefits. Our tools can show you the impact on lifetime benefits for deciding to claim early, at full retirement age, or even under late filing scenarios where you receive an 8% delayed retirement credit for each year you delay collecting benefits between full retirement age and age 70.

Personal Savings

The last leg of the three-legged stool is personal savings. From a planning perspective, this may be the most important leg – and one you can control. Although pensions are not as readily available as they once were, most employers sponsor some type of retirement savings plan. Retirement plans, like 401(k) plans, give you the ability to set aside some of your paycheck. Your savings, and any additional contributions made by your employer, grow tax deferred for retirement. Individual tax-advantaged saving can also be done by workers through IRAs or Roth IRAs. Tax-deferred retirement savings accounts and taxable savings accounts create an asset base to live on during your retirement. Many people understand the importance of planning and saving for retirement but find it difficult to transition from accumulating assets for retirement to turning assets into income during retirement.

Retirement income will be the focus of our articles for the month of August. We will review ways to generate retirement income and why it is important to have a plan for it, and if you retire early, how you can structure penalty-free income from your retirement accounts. Talk to a financial advisor today if you would like help creating a plan for receiving retirement income.



Benjamin F. Edwards does not provide tax advice; therefore, it is also important to consult with your tax professional for additional guidance tailored to your specific situation.



[i] Cost-of-Living Adjustment (COLA) Information | SSA

[ii] Social Security Basic Facts (

[iii] The Economics Daily: U.S. Bureau of Labor Statistics (