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The Four Pillars of Financial Security

Ensure your retirement plans have the proper foundation by strengthening these four areas

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Traditionally, retirement has been a three-legged stool made up of Social Security, pensions, and personal savings. But AARP, in its publication "Reimagining America: AARP's Blueprint for the Future," says that true financial security is now constructed upon four pillars. Here are the areas to check to make sure your retirement plans have the proper foundation.

1. Social Security. Social Security provides 40 percent of retirement income, on average, for Americans and makes up 80 percent of retirement income for retirees at the bottom 40 percent of the income scale, disproportionately women and minorities. According to Social Security Administration actuaries, Social Security can pay full benefits through 2041 as it is now funded. After that date, Social Security is expected to be able to pay 74 percent of the promised benefits. Anyone born after 1960 will not qualify for full benefits until age 67.

2. Retirement plans and individual savings. At one time, these were separate categories. However, as employer-sponsored retirement plans have changed from the traditional defined-benefit pension to defined-contribution plans like 401(k)'s, the responsibility for retirement security has shifted from the employer to the worker. That has made 401(k)'s virtually indistinguishable from other savings, according to AARP. So, it is important to contribute at least enough to your 401(k) to receive your full employer match and also to maintain other savings and investments.

3. Continued earnings from employment. Current seniors tend to choose a traditional retirement of relaxation, but many baby boomers have no intention of following in their footsteps. People keep working for income, health benefits, social interaction, or simply something to do. Even a trickle of additional income can help you cover monthly bills and expenses without depleting your savings or depending so heavily on your Social Security check.

4. Health insurance coverage. Health is the single most important factor in your retirement well-being. To maintain financial security, you must invest in health and be able to pay for it. This includes preventive measures like eating right, exercising, not smoking, and getting regular checkups, as well as treating illness early and efficiently. Health insurance is something you must have in retirement. And even if you retire after age 65, Medicare is not free insurance. You still have to pay premiums and coinsurance, and meet deductibles. Medicare also doesn't cover services for all ailments, so many people supplement Medicare with additional health insurance.