Americans aren't feeling very confident about their Social Security benefits. In fact, according to recent research from SimplyWise, around 55% of Americans are worried this popular entitlement program will be out of money by the time they hit retirement age.

The good news is that this fear is misplaced. But the bad news is that even as pre-retirees express concern about the future of Social Security, they're being overly optimistic about what their benefits will actually be able to do for them in retirement. Here's why. 

Couple looking at financial paperwork in dismay.

Image source: Getty Images.

Social Security can't run out of money, but it won't provide the income most people expect it to

Although more than half of Americans are afraid Social Security will run out of money before they get to retirement, this small majority will be relieved to learn this outcome isn't possible. Social Security has some continuing sources of income, including tax revenue from higher earners who are receiving benefits already as well as payroll taxes collected from current workers. Unless Congress changes the law, these funding sources alone will continue to provide billions of dollars in annual income, so the program cannot ever go bankrupt as long as people are still working and still collecting benefits. 

What can -- and will -- happen, however, is that tax revenue (and interest income the SSA also receives) will not be enough to pay out all of the promised benefits. Social Security is going to have to start drawing from trust fund reserves, and the program's trustees project the combined trust fund for the disability and retirement benefits program will run short in 2035 (it could actually happen earlier due to COVID-19). 

If the trust fund is allowed to run dry, the money will only be available to pay out about 76% of promised benefits to retirees. That means a big cut to benefits will be needed, but also that future retirees don't need to worry about getting no income from the program. 

What pre-retirees should be more concerned about, though, is that many are overestimating the money Social Security will provide them (even under a best-case scenario). In fact, on average, workers in their 50s and 60s expect that they'll get more than half their retirement income from Social Security.

In reality, these benefits are designed to replace only about 40% of pre-retirement income, and the average benefit in 2020 provides just $18,036 a year to live on. With Social Security benefits losing buying power, a potential benefit cut on the horizon, and many retirees spending the same as their pre-retirement salaries (or more), expecting these benefits to be such a major source of retirement funding is setting yourself up for disaster. 

Don't make the wrong Social Security choices based on misguided worries

Since Social Security will be an important source of retirement income, it's essential that you're realistic about what it can do for you when you're setting your retirement savings goals.

The bottom line is that you can count on it to provide some of your income as a retiree, so don't assume it won't be there for you -- but it may not offer as much money as you're hoping for. You'll need to make sure you don't plan to over-rely on it when determining the amount of income your investments need to produce.