If you're like most Americans, you're probably not 100% clear on how Social Security benefits work. While it's common knowledge that Social Security will provide you with income as a senior, Americans have tons of misconceptions about many key facts about Social Security. But none of those misconceptions is quite so dangerous as the myth that living on Social Security alone is possible with no other source of income. 

Unfortunately, this is a myth many Americans buy into. In fact, a recent survey from Nationwide found a full 26% of older adults believe they're going to be able to rely on Social Security as their sole source of funds to live comfortable lives in retirement. Nationwide also found 56% of pre-retirees believe Social Security will provide for more than half their expenses in retirement. Sadly, all of these Americans are wrong -- and those planning on relying on Social Security alone are dangerously wrong. 

If you're one of the millions of Americans operating under the mistaken belief that Social Security is going to support you as a senior, look at the facts today so you can adjust your expectations and start saving before you end up a broke retiree. 

Senior woman looking worried.

Image source: Getty Images.

Social Security is designed to replace only 40% of pre-retirement income

There's one simple reason why Social Security isn't going to be nearly enough to support you as a senior: It's not designed to. The Social Security program is not meant to be the only source of funding you have, and the Social Security Administration makes very clear that the program will replace only around 40% of what you were earning before leaving the workforce. Unless you can cut your spending by 60% in retirement, you're clearly not going to have enough cash from Social Security. And the sad fact is that even if you think you'll be able to slash spending this much, you won't. 

Most financial experts believe you'll need at least 70% to 80% of your final salary to live comfortably in retirement. Research has also shown that spending actually increases for many retirees compared to financial outflows prior to leaving the workforce. Sure, some of this spending is for fun stuff like taking trips. But a lot of it is for healthcare expenditures, which aren't usually optional. In fact, Nationwide estimates a senior who claimed Social Security at 62 could spend 64% of Social Security income on healthcare, on average.  If you're relying on Social Security alone, you aren't going to come close to making ends meet. 

Relying on Social Security alone will leave you struggling

Not yet convinced you can't survive on Social Security? Let's look at a few more numbers.

In 2019, the average Social Security recipient will receive $17,532 in annual benefits. The federal poverty level for a one-person household this year is $12,490. That would mean that if Social Security was your only source of income, you'd have just $5,042 more income than a person officially defined as living in poverty.

Unfortunately, many benefits programs, including the Supplemental Nutrition Assistance Program, establish eligibility levels for benefits at 130% of the federal poverty level. This means relying on Social Security alone is likely to leave you not quite poor enough to get benefits that could help you, but with too little income to be comfortable -- especially when taking high healthcare costs into account. 

Unfortunately, you're likely to only fall further and further behind, as Social Security benefits continually lose buying power. Many believe this is happening because Social Security Cost of Living Adjustments are tied to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which isn't a very accurate measure of what seniors actually spend their money on. Whatever the reason, the fact that benefits are losing buying power means that as you get older and your healthcare gets more expensive, your financial shortfall is likely to be worse. 

Don't force yourself to live on Social Security alone

You can see why it's so dangerous to believe Social Security is going to provide you with a comfortable life in retirement. You need other sources of income, such as money from investments. You should start saving today to make sure you have the funds necessary to supplement Social Security. And if you're nearing the time of retirement with too little saved, consider working longer to build a comfortable nest egg to make up for the income Social Security doesn't provide. Don't let your misconceptions about Social Security destroy your golden years -- now you know the truth, and can act on it to save for your future.