If the present snapshot of Social Security is in any way indicative of the future, working Americans today are likely to lean on Social Security in some capacity during retirement.

According to the April 2018 snapshot from the Social Security Administration, 62.3 million people were receiving a benefits check each month, and nearly 43 million of these folks were retired workers. Of these retirees, 62% are dependent on the program to account for at least half of their monthly income, while just a hair over a third (34%) are essentially leaning on Social Security for the whole shebang (90%-100% of monthly income). Even though the average retired worker is only taking home $1,411 a month, this is enough to keep more than 15 million retired workers above the federal poverty level, based on an analysis conducted by the Center on Budget and Policy Priorities. 

It's pretty evident how important Social Security has been to past generations of retirees and the current class of beneficiaries. The big question is: What should be expected of today's working Americans when they hit retirement age?

A small stack of Social Security cards messily laid on top of each other.

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How reliant will working Americans be on Social Security?

To answer this question, we'll turn to the latest survey results from national pollster Gallup. Each year since 2001, Gallup has surveyed nonretirees about their expected reliance on Social Security by asking them one question:

"When you retire, how much do you expect to rely on Social Security -- will it be a major source of income, a minor source of income or not a source of income at all?"

Keeping in mind that the Social Security Administration guides working Americans into the thinking that the program will replace approximately 40% of their working wages during retirement, here's what the respondents had to say in April 2018:

  • 30% said it would be a "major source."
  • 54% said it would be a "minor source."
  • 14% said it would be "not a source."
  • 2% had no opinion or didn't answer.

In terms of the 30% of working-age Americans who expect to be heavily reliant on Social Security when they retire, this figure isn't out of the ordinary. In fact, the percentage of respondents who've considered Social Security to be a major source of income when they retire has vacillated between 29% and 36% in every year since 2008.

However, the combined 84% of respondents who will at least be in some capacity leaning on Social Security during retirement to make ends meet (30% major plus 54% minor) is a bit out of the ordinary. Only three times over the last 15 years has the expected reliance on Social Security by nonretirees hit as high as 84%: April 2008, April 2015, and the newest survey, April 2018. Or, to put it another way, working Americans' expected reliance on Social Security is tied for a 15-year high. 

A worried businessman staring at a stack of coins.

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Nonretirees' growing reliance on Social Security is worrisome

Considering that Social Security provides a guaranteed benefit check to those who qualify, the results from Gallup's survey might not seem like that big of a deal. But in reality, workers' increasing reliance on Social Security is very concerning given the program's intermediate-term future.

You see, according to the Social Security Board of Trustees' 2017 report, the program is now just 16 years away from serious trouble. Beginning in 2022, Social Security will be paying out more in benefits than it's collecting in revenue for the first time in four decades. Though the program will have built up $3 trillion in excess cash over those 40 years, it's only expected to take 12 years (until 2034) to completely deplete this $3 trillion in asset reserves. What happens when this extra cash is gone is often a great source of confusion.

The silver lining for seniors, if there is one, is that Social Security's primary funding mechanism -- its 12.4% payroll tax on wage income of up to $128,400, as of 2018 -- ensures that the program cannot go bankrupt. Essentially, as long as people keep working, the payroll tax will continue to generate revenue that the Social Security Administration can divvy out to eligible beneficiaries. Social Security is in absolutely no danger of running out of money, and it will be there to provide a benefit, at least in some capacity, to many future generations of retirees.

But there's a big difference between a program that'll survive and one that's sustainable at the current payout schedule. The Trustees report is very clear that the current payout schedule isn't sustainable beyond 2034, unless new revenue is raised and/or expenditures are reduced. This would mean potentially having to cut benefits on an across-the-board basis by up to 23%. That would prove devastating to the 30% of future retirees expected to lean heavily on Social Security, and may even compromise the 54% who expect Social Security to be a minor source of income.

A businesswoman holding a tablet and looking out a window.

Image source: Getty Images.

There's time to change

Now for more of that bright side: There's time for working Americans to change their habits in an effort to reduce their future reliance on Social Security. Considering how often Congress has kicked the can down the road on Social Security, lawmakers simply can't be relied on to bail out elderly Americans.

To begin with, workers need to do a better job of socking away money. According to data from the St. Louis Federal Reserve, the personal saving rate as of April 2018 was a measly 2.8%. It's practically impossible to build a substantive nest egg with so little in wage income being diverted into savings and investment. 

Along those same lines, it's also time for working Americans to adopt a budget and stick to it. Back in 2013, Gallup found that just a third of American households kept a detailed monthly budget, which certainly helps explain why saving rates are so poor. Without a proper budget, it's almost impossible for workers to keep track of incoming and outgoing cash flow.

And, of course, invest, invest, invest! Generally speaking, the earlier you start investing, the better chance you have of meeting your financial retirement needs. Time can be a powerful ally, if you start investing early, and it can help reduce your overall dependence on Social Security.

Ultimately, the path to a comfortable retirement rests in your hands.

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