Saving for retirement is complicated and confusing, and there are dozens of factors to consider when creating your retirement plan. How much should you save? What age do you plan to retire? How much will healthcare costs affect your budget?

One factor in particular that can have a major impact on your retirement is Social Security, and yet most workers don't fully understand how the program works. In fact, a whopping 77% of workers incorrectly believe Social Security benefits won't be available to them once they retire, according to a report from the Transamerica Center for Retirement Studies.

While it's true that the Social Security program is facing some cash shortage issues, the problem isn't as bad as you may think. And not understanding what you can expect from Social Security can make it much harder to plan your retirement.

Hundred-dollar bills stuffed inside a jar on a wooden surface.

Image source: Getty Images.

The future of Social Security

There are plenty of startling headlines about the future collapse of Social Security, but it's not quite as grim as it seems. The program itself isn't going anywhere, because as long as people continue paying their taxes, there will always be at least some money to pay out in benefits. However, there is a chance that benefits could be cut in the next couple of decades.

Right now, as baby boomers retire in droves and life expectancies continue to climb, there's more money being paid out in benefits than is coming in from taxes. To bridge the gap, the Social Security Administration has dipped into its trust fund reserves to continue paying out benefits in full. Those trust funds are expected to run dry by 2035, though, at which point the only money that will be available to pay out in benefits is what comes in from taxpayers. Currently, the Social Security Administration predicts that tax money will only be enough to cover around three-quarters of expected benefits after 2035.

Of course, this is assuming Congress doesn't come up with a solution to fix the problem before then, most likely in the form of tax bumps or increasing the retirement age. While most workers won't like either of these solutions, if the government doesn't do anything, retirees may only receive around 75% of their expected benefits.

So what does this mean for you? In short, it means you should probably start preparing for a potential reduction in Social Security benefits. The government may figure out a solution before you retire, but if not, you could be in for a rude awakening if you're planning to rely on your benefits for a significant chunk of your retirement income.

Because the future of Social Security is in the government's hands, there's little the average worker can control. That said, there are a couple of things you can do to maximize your benefits and protect your retirement income.

Maximizing your Social Security benefits

One way to increase the amount you receive each month from Social Security is to delay claiming until after your full retirement age (FRA). Your FRA is either age 66, 66 and a few months, or 67, depending on the year you were born, and claiming at that age will ensure you receive the full amount you're entitled to. If you claim before that age (as early as age 62), your benefits will be reduced by up to 30%.

If the SSA is forced to cut benefits in the future, your checks could be reduced significantly if you claim before your FRA. But by waiting to claim until after your FRA (up to age 70), you'll receive extra money each month on top of your full amount. If your FRA is age 67, you'll receive a 24% boost each month by waiting until age 70 to claim, which can take the sting out of any potential benefit reductions.

Another way to increase your benefits is to work a few more years. Your basic benefit amount (or the amount you'll receive if you claim at your FRA) is based on an average of the 35 highest-earning years of your career. If you haven't worked a full 35 years, you'll have zeros in the equation for the years you haven't worked, lowering your average. Even if you have worked at least 35 years, you might choose to work longer so that some of your more current, higher-earning years can replace your lower-earning years from earlier in your career.

Keep in mind that although it's a good idea to maximize your benefits the best you can, at the end of the day, your monthly checks aren't designed to cover the majority of your retirement expenses. Your benefits are only intended to replace roughly 40% of your pre-retirement income, so you'll need a significant amount in personal savings as well to cover all your retirement costs.

Social Security is not on the brink of collapse, but there may be some changes in the coming years. Regardless of whether benefits are reduced or not, it's important to have a plan in place just in case you don't receive as much as you anticipate. The more you understand about how the future of Social Security affects your retirement plan, the more prepared you'll be.