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Auburn, Aug. 10---Retirement planning has long focused on what has been termed the "Three Legged Stool." This referred to a plan for retirement income that was structured like a stool with three legs. These legs were identified as Social Security (40 percent), a pension (14 percent) and personal savings and investments (46 percent).

Given the growing concerns about Social Security, a fourth leg is often mentioned. This leg is continued employment and it’s an option to consider since people are living longer and retiring earlier if they can, says Robert White, a financial specialist for Family Programs at the Alabama Cooperative Extension System.

For many people, this fourth leg is not optional. In fact, it may be the only leg they can count on when they retire. No, this unsettling future is not due to a future crash of the stock market, the collapse of Social Security or a plague of pension thieves, says White. The real reason many people will never be able to retire is that they never plan to retire. This is especially true of wage earners with low incomes.

Consider for a moment the decision someone faces when choosing between low- wage-reported employment and a cash job. The low-wage employment is a taxable income, whereas the cash job is never reported. The cash job may even pay more than the minimum wage. Reported income may negatively impact other income sources or support. Given that someone making this choice needs more income, not less, the choice made is often the cash job.

By selecting the cash job, the short-term income benefit robs the person of retirement opportunities, says White. The cash job obviously offers no pension. That’s one leg knocked off the stool. At 14 percent of typical retirement income however, it is the shortest leg of the three. Pension plans are a cost-efficient means of attracting and retaining employees; so this represents a real retirement option not taken. Contributions are often matched by employers and can be tax deductible. Cash jobs don’t offer that.

The cash job knocks a second leg off right away. You can only expect future Social Security benefits if you have paid into the system. Not only is the cash job not reported to the Internal Revenue Service, Social Security never credits the worker for the employment either. This decision is even more costly when you consider the other benefits that are lost. The cash job will not provide income for dependents of the worker in case of the employee’s death. The cash job will not provide disability either. Lastly, the unreported cash income won’t provide the insurance coverage of Medicare.

So there’s just one traditional leg of this stool remaining. Personal savings and investments are still possible, even if a worker only has cash income. Of course, someday the IRS might want to know how someone with no income has money in savings or investments. Given that concern and the fact that it’s just plain hard to save on a low income, this is a very unstable leg. Saving and investing may still be hard if the worker chooses instead to take a job with reported income, but it won’t get the IRS interested. If just $50 can be saved and invested every month for 30 years with an average annual return of 8 percent, approximately $75,000 would be available for retirement.

The cash job also takes away the possibility of the numerous tax credits offered working families with a lower income. Consider also the problems that cash employment creates for demonstrating employment histories and credit applications. Buying a home is a sound part of many retirement plans. Mortgages are usually based on income and

credit history. The cash job doesn’t support either of these.

The cash job ultimately means that retirement may never happen. Pensions, Social Security, personal savings and investments, however, are all possible at lower wage employment.

Retirement planning is not just something for the wealthy. It’s just for people who want to retire.