Banking on Social Security to pay your bills in retirement? That's a risky move for at least two reasons. One, for most people, Social Security replaces about 40% of your working income -- which won't fund your current lifestyle. And two, the federal response to the coronavirus pandemic may put pressure on an already delicate Social Security outlook.

Before anyone had heard of COVID-19, the Social Security program already had some trouble brewing. The issue is a changing population of workers vs. retirees, and how that affects Social Security's revenue and expenses going forward.

Social Security generates its revenue through payroll taxes. The funds collected from you and other workers today are used to pay out benefits to the current generation of retirees, survivors, and those who qualify for disability. Historically, that system has worked, because the revenue generated from taxes is enough to cover the expense of current benefits. In some years, there's even been a sizable surplus of money remaining after benefits are paid.

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That dynamic is expected to change, however. The baby boomer generation, which outnumbers the younger Generation X by about 7 million people, is gradually moving out of the workforce and into retirement. As that trend continues, it affects revenue and expenses for Social Security, and not in a good way. Fewer workers means lower revenues, while more retirees increase expenses.

As a result, Social Security's Board of Trustees predict that the program's costs will be higher than its revenues annually, starting in 2021. Reserved funds, built from surpluses in prior years, can cover the shortfall until 2035. If no changes are made to Social Security before 2035, benefits would have to be cut to fall in line with revenues.

Payroll tax holiday for coronavirus relief

Any reduction in Social Security's revenues from what's projected would expedite the depletion of the program's surplus funds. This is where coronavirus relief comes into play. In early August, President Trump signed an executive order that defers Social Security and Medicare payroll taxes from September 1, 2020 through the end of the year. Any deferred taxes would have to be repaid by April 15, but the Treasury Secretary has the option to extend that deferral for up to a year. No penalties or interest will be charged on the deferrals.

Subsequently, President Trump has floated the idea of making the tax cut permanent if he's reelected in November. The President has also said the move would not affect Social Security benefits but hasn't elaborated on what would replace the program's revenues if the tax is permanently reduced or eliminated.

The temporary tax deferral wouldn't be the end of Social Security, but a more permanent tax change raises big questions about how Social Security will continue to function going forward.

Retirement moves to make now

In reality, lawmakers aren't likely to allow Social Security to lose its primary source of revenue. But it is possible that extended coronavirus tax deferrals could expedite how quickly Social Security uses its surplus funds.

So, what's a would-be retiree to do amid that uncertainty? The best course of action is to minimize your dependence on Social Security by saving aggressively to your own retirement accounts.

To start, rethink your household budget with the goal of contributing 15% or more of your income to retirement savings. Make sure you have those contributions invested for long-term growth. For most savers, a solid approach is to invest in low-cost mutual funds that track a broad market index, like the S&P 500. Vanguard 500 Index Investor Admiral Shares (VFIAX 0.70%) is an example. The fund has a low expense ratio of .04% and has produced a 10-year average annual return of 13.8% -- just a notch below the S&P 500's returns of 13.84% for the same time period.

You could also stash some money in dividend-paying funds or stock shares. Vanguard Dividend Appreciation ETF (VIG 0.19%) provides diversified exposure to premium dividend payers with a low expense ratio of 0.06%. The fund mirrors the NASDAQ U.S. Dividend Achievers Select index, which includes companies that have increased their annual dividends for at least 10 years in a row. The fund's 10-year average annual return based on net asset value (NAV) is 12.48%, which includes a dividend yield of about 1.8%. Reinvest the dividends while you're still working to build up this passive income source over time.

Finally, one of the most fruitful strategies for improving your retirement prospects is to raise your income. Every income increase is an opportunity to send more money to your retirement accounts. Look for opportunities to make more, either with your current job or by picking up side projects. Commit to investing the extra funds in your IRA or a taxable brokerage account.

Hope for the best, but plan for the worst

Social Security isn't dead, but the program may have some changes ahead. The best way to protect your retirement in spite of what's happening with Social Security is to save as much as your budget allows. Invest those savings in broad market funds for growth and dividend income. That's not a strategy you'll regret, even if lawmakers do find a way to patch up Social Security down the road.