Our Wobbly Retirement Reality

By Michelle Singletary
Sunday, October 26, 2008

In retirement planning, financial advisers often talk to clients about a three-legged stool. It is an analogy for how we all should plan for our sunset years.

One leg of the stool is supposed to represent retirement savings. In the past, this meant a company pension. Now for many workers, it's a retirement plan they fund themselves, such as a 401(k).

The second leg represents personal savings, such as cash bank accounts or certificates of deposit. The savings component might also include other assets, such as your home.

The third leg is Social Security, which provided at least half the income for 64 percent of seniors in 2006.

All three legs of the retirement stool are unstable.

And had we listened to President Bush and others, that last leg -- the safety net that has kept millions of seniors, children and the disabled from poverty -- would have been exposed to the recent turbulence and historic drops in the stock market.

Bush wanted to privatize Social Security by allowing younger workers to divert some portion of the payroll taxes into the stock market. One plan would have allowed people to invest in stocks, bonds or some mix of securities.

We, the people, Bush said, could invest our money and get a better return than the projected Social Security benefit checks.

But what if what we're going through is the Great Millennial Meltdown akin to the Great Depression? What if it takes 10 or 20 years for the stock market to recover?

In the past month, investors -- many trying to fund their retirements -- have lost, at least on paper, trillions of dollars. That retirement leg of the stool is looking pretty wobbly right now.

The national savings rate in America has been pitiful, dipping into negative territory two years ago. That leg of the stool has teetered for years.

The one leg that wasn't supposed to ever get rickety is Social Security. Yet the financial condition of the Social Security system remains problematic, according to the latest trustees' report.

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