Retirement saving is a 'three-legged stool,' expert says

In a new interview with Yahoo Finance's Adam Shapiro, Edward Jones managing partner Penny Pennington discussed how retirement saving can be considered a 'three-legged stool' including a 401K or IRA, social security and one other key way to save.

Video transcript

ADAM SHAPIRO: One of the pieces of data that I pulled for the discussion with you comes from the Center for Retirement Research at Boston College. And they talk about the different income quintiles in the United States. And when we talk about that retirement number, the first three quintiles have on a median balance in their 401(k) of just barely $100,000. And if you look at the first two, it's barely $75,000.

So when someone is looking at retirement, 401(k) was never intended to be the sole source of income. Social security, in a worst case scenario, after 2035 may pay $0.70 on the dollar if Congress doesn't do anything. Are these the kinds of things that you talk about with clients as they prepare for that day when they have to generate the income for themselves?

PENNY PENNINGTON: Absolutely. And you mentioned a couple of things I'll just amplify. Social security was never intended to be the sole source of income. Historically, folks have looked at it as a three-legged stool. What they saved in their 401(k) or IRAs, social security, and investments outside of those two buckets of money.

And so how do we optimize those income streams in order to afford the type of lifestyle that's really one of greater well-being around your health, your family, your purpose, the legacy that you want to leave and then the set of financial resources that's going to enable you to do all of that.