Social Security serves as a critical source of income for millions of retired seniors. But today's older workers may be relying too heavily on those future benefits. According to Bank of America Merrill Lynch, Gen Xers today think that 45% of their retirement income will stem from Social Security, while baby boomers expect those payments to represent 60% of their senior income.

And that's problematic for a number of reasons. First, Social Security was never designed to represent such large percentages. In a best-case scenario, those benefits will replace roughly 40% of the typical earner's pre-retirement wages. Most folks, however, need to aim for an 80% income replacement target to live comfortably in retirement, and we're not talking about those who wish to travel extensively and enjoy the good life. Rather, that 80% target is what the typical senior will need today to enjoy a modest, non-cash-strapped lifestyle. And Social Security will only provide half that amount at best.

Serious older man

IMAGE SOURCE: GETTY IMAGES.

But there's a reason I keep throwing that "best case" caveat around, and it's that based on the latest projections, come 2034, Social Security might start cutting benefits if lawmakers don't implement a plan to address the program's impending shortfall. Specifically, eligible recipients might see their payments slashed by as much as 23%, thereby invalidating the aforementioned 40% replacement income target.

All of this means one thing: Today's workers need to stop planning to fall back on Social Security, and ramp up their savings game instead. And thankfully, there's one group that seems to be less dependent on those benefits: millennials. In fact, younger workers expect that 65% of their retirement income will come from personal sources, like savings, leaving Social Security to cover just 35% of their living costs. And that's the sort of realistic view older generations might want to adopt.

You can't live off Social Security

Though the future of Social Security is somewhat precarious, it's fairly safe to say that benefits won't be going away completely in our lifetime. Still, there's a strong chance that today's workers won't end up collecting the full benefits they'd otherwise be entitled to, and that's something we all need to plan for.

But even if we go the optimistic route and assume that benefits won't get cut within the next 20 years, the fact of the matter is that seniors today are still relying too heavily on Social Security, and older workers are in danger of following suit. A good 62% of today's beneficiaries count on Social Security for at least half of their monthly income, while 34% expect to it constitute 90% of their income or more. But considering the average beneficiary collects just $1,404 per month from Social Security, those percentages aren't comforting.

For example, the typical retiree today who counts on Social Security for half of his or her income is thereby expecting to live on less than $34,000 a year. Given that healthcare alone might eat up close to one-third of that figure, that's just not enough money to get by.

The solution? If you're still working, start saving. And if you're already saving something, start saving more.

Now the good news is that if you're younger, you stand a greater chance of amassing some decent savings without having to part with a ton of your paycheck. The following table shows how much you might accumulate if you start saving just $300 per month at various ages:

If You Start Saving $300 a Month at Age:

Here's What You'll Have by Age 65 (Assumes an Average Annual 8% Return):

25

$932,000

30

$620,000

35

$408,000

40

$263,000

45

$165,000

50

$98,000

Data source: author.

Clearly, 25-year-olds have the advantage in this scenario. If you're in your 40s or 50s (or beyond) without much of a nest egg, you'll need to do better than $300 a month. If you have access to a 401(k), you can start maxing out at $24,500 per year once you turn 50. Do that for 15 years, and you'll come away $665,000 richer, assuming that same 8% average yearly return (which, incidentally, is right below the stock market's average).

Either way, don't make the mistake of thinking Social Security will provide the majority of your retirement income, because even in that famed best-case scenario, it simply won't. And the sooner you realize that, the more opportunity you'll have to salvage your retirement in the least painful way possible.

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