'3-Legged Stool' No Longer Fits Retirement Reality

The traditional idea of financing retirement with a "3-legged stool" of personal savings, a workplace retirement plan, and Social Security income is no longer sufficient, according to a new study. The shift is causing most workers to re-think their definition of retirement.

For years, Americans have thought about retirement in terms of a “3-legged stool,” with their golden years financed by a mix of personal savings, Social Security, and a workplace pension or 401K. However, a new study shows the majority of workers now envision a fourth leg to funding their retirement: Working.

The Transamerica Center for Retirement Studies, a California-based nonprofit, found a majority of workers now expect to continue working in some capacity well into their traditional retirement years.

“The long-held view that retirement is a moment in time when people reach a certain age, immediately stop working, fully retire, and begin pursuing their dreams is more myth than reality,” said Catherine Collinson, the center’s president, in a press release.

Instead, Collinson said, many workers view retirement as a transition from full-time work, to part-time or intermittent work.

Specifically, the study found 20% of workers expect to work as long as possible; 41% said they plan to work reduced hours or working in a less-demanding capacity. Another 18% said they’re not sure what their retirement transition will look like.

Only about 1 in 5 (21%) said they expect to abruptly stop working once they reach a certain age or savings goal, the study found.

Collinson said working longer is a pragmatic solution to the problem of insufficient savings by many Americans.

“However, the implications for lawmakers and employers are profound and require updating public policy and employment practices,” she said.

The study found retirement is on the mind of most workers.

The majority of 20-somethings and 30-somethings included in the survey said they are saving for retirement. However, they’re not necessarily doing so in an informed manner. More than one-third (37%) of people in their 20s said they didn’t know anything about asset allocation. Of workers in their 30s, 68% said they don’t know as much as they should about retirement savings.

Meanwhile, people in their 50s had a median household retirement savings of just $117,000, and most—59%—said they intend to work past age 65. The same held true for people in their 60s. Eighty-two percent of people 60 and over who were surveyed said they either are working past age 65 or plan to work past 65. Of those, 56% said they couldn’t afford to lose the income or health benefits.