For much of the world, retirement can seem like a long ways away.  Most of us have a feeling that things will just work themselves out.  The reality is, you have to take care of yourself and your family and that no one else is going to do it for you.

We have been trained to believe that we will be safe because of the 3 legged stool of retirement planning.  Those three legs are social security, pensions, and 401(k)'s.  We need to be aware of the perils of relying on these three legs to hold us up for when we retire.

Almost everyone knows that social security is in trouble.  The promise of social security is that there will always be enough workers to support the smaller amount of retired and disabled people who collect social security checks.  The problem is that we are spending social security funds at a rate that will not be able to keep up with the growing number of persons collecting it compare to the amount of workers contributing to it. 

"By the year 2042, the entire system would be exhausted and bankrupt," said President George W. Bush not long ago. He also appealed to parents: "If you've got children in their 20s ... the idea of Social Security collapsing before they retire does not seem like a small matter."

Pensions have also not been all they are cracked up to be.  State and local governments in New York, New Jersey, California, Massachusetts, Vermont and Colorado are among the many who are feeling the crunch of a lack of funds in public pensions. It is calculated that as of 2003, the 123 largest state and city funds were around $366 billion short of meeting their retirement funding liabilities as a whole, and a whopping $611 million turnaround from where they stood in 2000.

One of the main problems with 401(k)'s is that they are not liquid enough.  If an emergency comes up, there are heavy penalties for early withdrawal.  Another problem is that there are many who spend their 401(k) money too quickly when they retire. If they run out before the end of their lives, they will be left with nothing but Social Security and any other savings they might have. 

I am not saying that a 401(k) us a bad thing, it can be a good part of financial planning.  You just have to be disciplined in managing it well and not putting all your nest eggs in this one basket.