Since time immemorial, a fully nutritious retirement plan has consisted of three legs: (1) company pension plans; (2) social security; and (3) your own savings accounts.
With every year that goes by, it is clear that the third of these three categories is going to be the predominant form of retirement savings. More and more old-economy companies have placed the blame for their state of affairs on their pension plans. You need look no further than the ever present examples of General Motors (NYSE: GM), Ford (NYSE: F), and such crippled airlines as Delta (NYSE: DAL) and the recurring scaling back of their pension plans to know the deal. UAL (Nasdaq: UAUA), IBM (NYSE: IBM), Caterpillar (NYSE: CAT), and Boeing (NYSE: BA) are additional examples of companies that -- while not at all yet crippled by pension plan obligations -- have started scaling back on their obligations.
Meanwhile, we have been prepped for years now with the fact that Social Security is not going to do for future retirees what it does for present ones. Whether this administration or any other effects real change in the way that Social Security is funded, the one thing that is an actuarial certainty is that those who are retiring 30 years hence will not be getting back a fair shake on what they put into the system. Social Security is not going away (as pensions just might), but no one should depend too much on the government to fund retirement.
Today's retirement plan: You, you, and you
The trend is that less and less of what you will need to have for your retirement will come from others. Traditional employer pension plans are going away, and Social Security is not going to fully fill the gap and will be less and less of a supplement. That leaves you.
We're not ones to curse the darkness around here, though -- or, in fact, even to claim that things look dark. They really don't for those who take the time to educate themselves about the many ways there are to intelligently save for retirement and who have the discipline to do so. Whereas similarly situated individuals decades ago would have been in similar retirement situations previously, the next generation's retirees will have radically different retirements depending on how well they have planned as individuals. Here are three brief places to start in securing your retirement:
1. Your employer and you
401(k) plans and other deferred contribution plans have largely replaced the simple employer pension. In many cases, an employer gives you free money, but only when you put in some yourself. Use your 401(k).
2. Your tax code and you
The federal government may be lightening up on Social Security, but it has provided an amazing assortment of tax incentives for you to save for your retirement. Some might even say mind-boggling. We've spent years building up an area devoted to explaining how you can improve your savings through traditional and Roth IRAs and tax deferral on long-term capital gains, and how to most efficiently employ the tax system. Check it out.
3. Your education and you
Above all else, the way that you'll be able to retire comfortably comes down to a healthy and sustainable investment plan. Creating and following one is a snap for some -- but a daunting hurdle for others. There's a lot to learn.
The Motley Fool Rule Your Retirement service is always around to help. We invite you to take a 30-day free trial, ask questions (and receive answers!), read how others have conquered the mysteries of retirement, and set up an educated plan.
Bill Barker does not own shares of any company mentioned in this article. The Motley Fool has a disclosure policy.
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