Financial gurus talk about the three-legged stool for retirement.
1. Social Security.
2. Employer's Retirement Plan (pension of some sort.)
3. Personal Savings.
Many of us never worked at mega corp so option 2 didn't exist, or at best is a 401k with some level of matching. I don't view that any different than personal savings because at the end of the day, there are no guarantees and the owner is responsible for managing it.
At the end of the day though, your compensation package is your compensation package and if the employer isn't providing #2, hopefully you're compensated more in your salary. I know I was.
Assuming the Net Present Value of a, b, c, and d are equal at the beginning of your retirement, which would you rather have?
a) Social Security, Pension, Personal Savings
b) Social Security, Pension
c) Social Security, Personal Savings
d) Personal Savings
Our situation is such that we will survive mostly on Personal Savings with a modest Social Security covering perhaps 1/4 of our expenses.
I was discussing this with my wife this morning. She is not very financially literate so I had to explain some things to her. But in her logic she saw that (assuming we do things correctly) if we can't make our personal savings last and we're in the same markets as everyone else, then everyone else is going to be in trouble too. Then I had to explain how we could use some of our savings to buy a pension with an SPIA and that takes some of the longevity risk away if we live a very, very long time.
Which would you prefer and what's your rationale?
1. Social Security.
2. Employer's Retirement Plan (pension of some sort.)
3. Personal Savings.
Many of us never worked at mega corp so option 2 didn't exist, or at best is a 401k with some level of matching. I don't view that any different than personal savings because at the end of the day, there are no guarantees and the owner is responsible for managing it.
At the end of the day though, your compensation package is your compensation package and if the employer isn't providing #2, hopefully you're compensated more in your salary. I know I was.
Assuming the Net Present Value of a, b, c, and d are equal at the beginning of your retirement, which would you rather have?
a) Social Security, Pension, Personal Savings
b) Social Security, Pension
c) Social Security, Personal Savings
d) Personal Savings
Our situation is such that we will survive mostly on Personal Savings with a modest Social Security covering perhaps 1/4 of our expenses.
I was discussing this with my wife this morning. She is not very financially literate so I had to explain some things to her. But in her logic she saw that (assuming we do things correctly) if we can't make our personal savings last and we're in the same markets as everyone else, then everyone else is going to be in trouble too. Then I had to explain how we could use some of our savings to buy a pension with an SPIA and that takes some of the longevity risk away if we live a very, very long time.
Which would you prefer and what's your rationale?
Last edited: