Hello, everybody. It's Sam from Financial Samurai. And in this episode, we're going to talk about the new three-legged stool for retirement. The old three-legged stool for retirement includes pension, social security, and personal savings. So given less than 15% of Americans have pensions or will receive pensions, no longer is having a pension part of most Americans' retirement plan.

Therefore, we can throw pensions out of the window for future generations. And for those of you with a pension, bless you, because your pension is probably more valuable than you realize. Given our social security system is underfunded by about 32%, the government will either cut the average social security benefit by 32% or raise the minimum age eligible for collecting social security by at least several years.

As a result, relying on a government that has perpetually mismanaged our finances is not a wise retirement strategy either. Besides, the average monthly social security benefit for 62-70 year olds is only $1,000 to $1,300, so you're not going to go crazy with social security anyway. Personal savings is the only leg of the old three-legged stool that's able to provide support.

Everybody who has the opportunity to contribute to a 401(k) plan should, and according to the Bureau of Labor Statistics, only about 55% of the American workforce has access to a 401(k) and only about 38% of the total workforce participates. So these are kind of sad numbers. Meanwhile, for those who do participate, the average 401(k) contribution was only about 6.5% of salary when employers didn't contribute and still only 11% of salary when employers did contribute.

Only 18% of 401(k) participants saved more than 10% of their salary for retirement. So for 2019, it's good to hear that the IRS has increased the maximum employee contribution to $19,000, that's up $500 from $18,500 in 2018. Meanwhile, the maximum employer contribution limit also rises by $500 to $37,000 for a total 401(k) contribution limit of $56,000.

So this is really important to note, folks. Do not underestimate the power of working for a stable and highly profitable employer with a strong benefits program. 401(k) matching or profit sharing can significantly boost your retirement funds over time compared to working at a sexy startup that might not even have a 401(k) plan due to a lack of profitability.

And really, a lot of startups are just dead in the water or they just fail after 5 years, which really puts you behind, especially since they already pay you under market value in terms of salary for the hopes that your equity options will be worth something in the future.

When I left my day job in 2012, I forewent roughly $20,000 a year in profit sharing. So I was an executive director at the time, I'd been there for 11 years, and I was contributing $16,500 as an employee, which was the maximum at the time in 2012, and then they would give me another $20,000 at year end, and that was really sweet.

But even though I forewent all that money, at least I got them to pay for my MBA at the time, which cost about, I think around $80,000, and they gave me a severance, which I can't complain about. So now I contribute as much as possible to a solo 401(k), a SEP IRA, and of course my son's 529 plan to the tune of about $15,000 a year.

Given times have now changed, and we cannot rely on pensions and the government for social security, I would like to propose the new definition of a three-legged retirement stool. Essentially, it's composed of three things. You, you, and you. So the first you is personal pre-tax savings, in other words 401(k), IRA, and so forth.

The second you is personal after-tax savings, which compose of your after-tax brokerage account, CD, money markets, bonds, fixed income, private equity, venture debt, and so forth. And the third you is composed of personal hustle. So everybody should figure out a way to contribute the maximum to their 401(k) savings each year, even without a company match.

Your goal is to minimize your taxable income, allow your investments to compound, tax deferred for as long as possible, and then build a large enough after-tax portfolio to give yourself options to change jobs, take a break, be a stay-at-home parent, or retire before the age of 59 and a half.

And in the post, I do highlight again my after-tax investment amounts by age to comfortably retire early to give you some idea of how much you should have in your pre-tax accounts and after-tax accounts at every single stage of your life. So clearly, in order to build this type of wealth, it will take a tremendous amount of discipline.

You can't just go blow your money on stupid things you don't need. You need to continuously reinvest the large majority of your savings into risk-appropriate investments. And yes, you do need to take risks, folks. The people who are saying, "Wow, I don't understand how people have so much money in their investments and all that." These folks don't take risks.

It takes guts to come up with a 20% down payment to buy a property and to maintain it and all that stuff. It takes guts to invest in the market sometimes, especially if it's cratering. The key also is to delay your gratification. That is the key to so many things to being in good shape, to building wealth over time.

It's delaying gratification. So the third leg of the new retirement stool is earning money doing something you enjoy. This is your personal hustle. So one of the most dangerous things about post-work life is letting your mind and body atrophy. This is one of the reasons why I let my dad edit most of my posts.

It keeps him on his toes. It keeps him sharp. He's 72 years old and he actually has said, "I appreciate you letting me edit the post." He's a pretty brutal editor and he changes a lot of my meanings. It's tough sometimes to see it as a creator, but I think it's for the greater good and he does catch some things and it helps his mind.

So the more you can stay active post-traditional work, the better your retirement lifestyle. I truly believe this. So in my case, I stay active in post-work life by one, being a stay-at-home dad. It's a full-time job that any stay-at-home parent will realize how hard it really is. Two, I coach high school tennis for three to four months a year.

And then three, I write daily on Financial Samurai and sometimes I do this podcast. So all three activities have a monetary component that enables me to better preserve my retirement nest egg. What you'll discover after leaving full-time work is that it becomes extremely difficult to spend down principal. You've spent years, if not decades, accumulating your wealth.

So it's really hard to go in reverse. Being a stay-at-home parent, both of us, allows us to save about $3,000 a month in childcare costs. Coaching high school tennis brings in about $1,250 a month and allows me to build relationships with other members of the community. And there are some really interesting parents who are doing interesting things, such as one parent who is the CFO of Lyft and Lyft is going to go public in 2019.

I think that's pretty cool. Another parent is a district attorney of San Francisco. So these are all really interesting people to meet and we get to talk and hang out and it's really fun. And then finally, while riding daily on Financial Samurai, it does keep my mind sharp, it also brings in some spare change to boot, right, through advertising, revenue, just random opportunities and so forth.

So one of America's biggest retirement failures is allowing people to decide how much they should save for retirement. If you were to give people a choice between spending money on cheeseburgers, nice cars, fancy clothes, shoes, vacations, electronics, and more cheeseburgers, or saving for a retirement that is decades away, obviously, obviously the majority of Americans are going to choose the former.

Thus, it is unsurprising that roughly 66 of Americans are overweight, and the median retirement savings for all families is less than $10,000. It was $5,000 as of 2013. So I'm assuming it's gotten better since the bull market has run quite well since 2013. But even if it's $10,000, that's just not enough.

Our lack of discipline is literally ruining our lives. I mean, do you really want to be overweight and kind of broke in your latter part of your life? No, it's just like terrible. There's like some statistic that says that 80 plus percent of men in America over 50 are overweight or obese.

I mean, that's not good, folks. We got to like, really take back that discipline. We should have adopted a forced retirement savings system when companies automatically deduct money from each employee's paycheck for retirement, much like how payroll taxes are automatically deducted. You know, the government knows that if they don't take money out of your paycheck for taxes, people aren't going to pay their taxes, right?

I think it's pretty obvious because we lack self-discipline. You know, this forced retirement savings system, it's worked in countries like Australia and Singapore. You know, Australia has the largest inheritance amounts in the country because they're forced savings and they're buying property and they've got these great savings, retirement savings accounts.

But unfortunately, it's already too late for change, right? We're just, I think, kind of in this situation through our own demise. Therefore, the only thing we can really do is count on ourselves. If we can depend on our own hustle to survive in retirement, all other government benefits will simply be a nice bonus.

I'm going to be pretty psyched if I start getting, let's say, $2,000 a month in Social Security, let's say, after the age of 65. I'm going to use that, I don't know, probably to go on a cruise, travel, eat some food. But I'm definitely not counting on that to spend in retirement.

You know, I want to get my own finances right and so should you. Don't rely on anybody else but yourself. So please spread the word about the new three-legged retirement stool. I think it's going to be great for our country. Let's focus on building our you number one with personal pre-tax savings, our you number two with personal after-tax savings, and our you number three with personal hustle.

I think if we do that, America is going to be a stronger country and we're going to do much greater things going forward and live a much better second half of our life. Thanks so much everyone. It's been a really, really fun week. I went public with the launch of the Financial Samurai Forums, so hopefully I can see you guys there interacting.

There's over 1,150 members now and it's just great to see people interacting and sharing their ideas and thoughts. My parents were here for about a week and it's been great for them to see and spend time with our son and that's really all I really want because they're in Hawaii and I'd love for them to visit more often.

So thanks so much everyone and I'll see you guys around.