The “three-legged stool” of retirement, once a sturdy metaphor for financial security in old age, was conceived in the mid-20th century by Reinhard A. Hohaus, vice president and chief actuary for the Metropolitan Life Insurance Company. The phrase emerged as a way to simplify the public’s understanding of retirement planning, with its three supports: Social Security, employer-sponsored pensions and individual savings. 

The image effectively underscored a key truth in how no single “leg” could bear the weight alone. All three income streams were essential to sustaining a prosperous life after one exited the labor force. But today, that analogy is no longer applicable.

While Social Security remains funded through 2033, fiscal hawks continue to question its future, despite the program’s broad popularity and the policy levers available to sustain it. Collapse is unlikely, though significant changes are far from unthinkable. Meanwhile, the employer pension has all but disappeared. Over the past 50 years, the shift from guaranteed, employer-provided monthly stipends for the rest of one’s life to defined-contribution plans like the 401(k) has transferred the burden of retirement planning from corporations to workers. 

This Transition Wasn’t Accidental

It was a change intentionally driven by corporate cost-cutting and reinforced by public-policy choices at a time when the private sector was under pressure to reduce labor costs. 

As a result, millions of Americans are now left with — if they’re lucky — two legs on their proverbial stool. Only the ultra-rich can still claim a reliable, sturdy seat.

Today, the idea of a three-legged stool propping up retirement is mostly an opportunity to wax nostalgic about the golden era of yesteryear’s workforce. In today’s economy — unless, again, you’re among the wealthiest — there’s hardly any stool left at all. Employer pensions are extinct. Personal savings are highly precarious, as nearly 40% of Americans struggle to make ends meet today, let alone have the capital to create wealth and purchase assets. 

In Work, Retire, Repeat: The Uncertainty of Retirement in the New Economy, economist Teresa Ghilarducci paints a stark picture. The median retirement account balance for workers aged 55 to 64 is a meager $15,000; contrast that with the $600,000 to $1.3 million (!) experts estimate the average American is required to maintain a modest standard of living in retirement. 

“Only elders at the top of the income distribution have anything resembling a stool,” she wrote.

The numbers are particularly dire for the bottom 90% of earners, many of whom face retirement with savings shortfalls in the hundreds of thousands. To reiterate, this dilemma isn’t limited to the impoverished. It increasingly includes the middle class, too, now bracing for a future where working into old age is a widely accepted reality. 

Ghilarducci cited a study from the Urban Institute showing that, by age 67, working-class Gen Xers will rely on Social Security for approximately 37% of their retirement income. The rest will be patched together from a few remaining sources: 24% from ongoing labor (likely gig work), 22% from home equity (for the fortunate), and a pittance (18%) from their 401(k)s.  

“So that means for our three-legged stool, the Social Security leg is 37 inches,” according to the author, “and the employer-pension leg is just 18 inches. That’s an awfully wobbly stool.”

So, Where Does This Leave Us? 

The political momentum for social spending on a New Deal scale has largely stalled. In its place, corporate tax cuts remain a priority, despite failing to deliver meaningful support to working Americans. The result is a path that risks further economic destabilization. Yet not all reform requires radical reinvention. Raising the cap on Social Security contributions, for instance, is a far more feasible policy than sweeping proposals like Medicare for All or the nationalization of essential industries, even if those ideas may offer broader long-term benefits.

In the private sector, responsibility must also be reclaimed. Employers have a critical role to play in restoring retirement security by offering retirement plans, contributing matching funds, and helping workers build the foundation for long-term financial health. 

In many states, such offerings are now mandatory. But the deeper challenge is systemic. Small businesses lack the margins, and low-wage workers the income, to meet these obligations. It’s a crossroads the country has yet to fully confront. 

Still, the choices made today by policymakers, employers and individuals alike will determine whether retirement regains its footing or continues its collapse.

More than ever, retirement depends on private savings. Yet most Americans lack the support to build lasting wealth. The responsibility has shifted to individuals, but the systems meant to help them succeed have not met the moment. Stagnant wages and a rising cost of living continue to create barriers to long-term financial security, leaving many without the means to build the final leg of the stool.