Social Security serves as a major source of income for millions of seniors today -- so much so, that 39% of Americans are convinced they won't be financially secure in retirement without those benefits, according to a report from Provision Living. The problem, however, is that Social Security was never designed to pay for retirement by itself. And the sooner more working folks recognize that, the better equipped they'll be to step up and save to avoid financial struggles later in life.

Social Security can't do it all

Many workers are led to believe that all they need is a monthly payment from Social Security to keep up with their bills in retirement. Not so. Those benefits, at present, are designed to replace about 40% of the average worker's pre-retirement income. Most seniors, however, need double that amount to live a reasonably comfortable lifestyle.

Pile of Social Security cards

IMAGE SOURCE: GETTY IMAGES.

The average recipient today collects about $1,460 a month, or just over $17,500 a year. That's just a tiny notch above the poverty line for a two-person household today, and only about $5,000 above the poverty threshold for a one-person household. In fact, Social Security, at its very core, is really nothing more than a glorified means of poverty protection. Folks who expect their benefits to cover luxuries like cable TV, vacations, leisure, and restaurant meals are in for a very unpleasant surprise.

Further compounding the issue is the fact that Social Security is facing some serious financial challenges that could impact benefits within the next 15 years. Once the program's trust funds run out, which is currently projected to happen in 2034, recipients might lose as much as 21% of their scheduled benefits.

In other words, that $17,500 a year we just talked about could get whittled down to just under $14,000. Of course, that assumes no cost-of-living increase between now and 2034, which is fairly unlikely. The point, however, is that those benefits probably won't have the buying power so many people expect them to have.

Securing your own future

While it's OK to assume that you'll get some money out of Social Security in retirement, the reality is that you'll need way more income than what those benefits provide to keep up with your bills. The good news, however, is that if you still plan to work for many years, you can build up your own nest egg to ensure that you have enough money to live the life you want in retirement.

Beginning in 2019, workers under 50 will have the option to sock away up to $19,000 per year in a 401(k) and $6,000 in an IRA. For workers 50 and older, these limits rise to $25,000 and $7,000, respectively. Of course, maxing out either type of retirement plan is easier said than done, but if you begin saving from an early enough age, you won't have to. The following table shows what a monthly retirement-plan contribution of $400 might do for you in the long run:

If You Start Saving $400 a Month at Age:

Here's What You'll Have by Age 67 (Assuming a 7% Average Annual Return):

22

$1.37 million

27

$958,000

32

$663,000

37

$453,000

42

$303,000

TABLE AND CALCULATIONS BY AUTHOR.

Now let's imagine you've already been working for about 15 years and have completely neglected your nest egg thus far. If you manage to save $500 a month for the next 30 years, you'll have $453,000 to work with in retirement if your investments give you a 7% average annual return during your savings window. (That number is a couple of percentage points below the stock market's average and more than feasible to accomplish).

If you then withdraw from that balance at a rate of about 4% per year, which many financial experts recommend, you'll have about $18,000 of annual retirement income to work with. And that, combined with your Social Security benefits, is enough to not only keep you out of poverty, but allow for some of the luxuries in which you'll want to partake.

There's nothing wrong with counting on Social Security to supply a portion of your retirement income down the line. But to expect your benefits to cover all or the majority of your senior living expenses truly is asking for trouble. And the sooner you accept that, the greater your chances of salvaging the finances of your golden years.

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