Social Security plays an instrumental role in helping seniors keep up with their living expenses. But a frightening number of workers neglect their personal savings thinking they'll fall back on those benefits once the time comes for them to retire. In fact, an estimated 12% of Americans aged 65 and over have less than $1,000 in a retirement savings plan, which means they're likely to become wholly reliant on Social Security once their careers end. And here's why you're likely to wind up sorry and cash-strapped if you decide to go that route.

1. Those benefits will replace only about 40% of your former income

Social Security will replace approximately 40% of the average wage-earner's pre-retirement income. If 40% of your current paycheck sounds like it'll suffice in keeping you afloat financially, then you can continue neglecting your savings and bank on those benefits alone. But if the idea of a 60% pay cut frightens you, which it should, then recognize that while Social Security will certainly provide you with some income for your golden years, it won't cover all of your bills -- especially since certain expenses, like healthcare, are more likely than not to climb as you get older.

Social Security card wrapped in bills


2. Those benefits will largely remain the same throughout your retirement

The great thing about Social Security benefits is that they're consistent -- you'll get the same monthly benefit for life in retirement, and annual cost-of-living adjustments (COLAs) may even give that figure a modest boost from year to year. The income you're able to withdraw from a retirement savings plan may not be as consistent -- market fluctuations could drive your account balance down, thereby creating a scenario where you're unable to remove the same amount of money from your account one year as you did the previous year.

But that consistency comes at a price, and it's that you'll pretty much never get a year when you suddenly come into a whole lot of extra money from Social Security once you've already been collecting a benefit. Over the past 20 years, COLAs have averaged 2.15%, but some years saw a 0% COLA. As such, if you retire without any income other than Social Security, it's basically the same as resigning yourself to never getting a meaningful raise again in your life.

If you enter your golden years with retirement savings, however, there's the potential for your portfolio to have a number of really strong years during which time its value increases substantially, thereby allowing you to withdraw more funds. And while you can argue that "up" years could easily be offset by "down" years, remember that you don't actually lose money in your portfolio if you leave your investments alone. As such, you'll have the option to leave your nest egg untouched when the market experiences a downturn, and then tap your retirement savings at the right time to benefit from upswings.

3. There's a chance benefits will be cut in the future

Though Social Security is not on the verge of going bankrupt, the program is facing some serious financial challenges that are predicted to come to a head in the coming decade and a half. The result? Current seniors and future Social Security recipients alike may be looking at as much as a 20% reduction in scheduled benefits as early as 2035 if lawmakers don't come up with a solution for the program's financial woes.

That 60% pay cut we talked about earlier? It could grow more substantial if a universal cut in benefits happens. And that's a risk you really can't afford to take.

Don't rely too much on Social Security

Though there's nothing wrong with factoring Social Security into your financial plan for retirement, you shouldn't make the mistake of counting on those benefits without an additional income source. If you've yet to start funding a retirement savings plan, start doing so immediately. Socking away $500 a month over 20 years will leave you with close to $250,000 if your investments generate an average annual 7% return during that time, which is just below the stock market's average.

You don't necessarily need to enter your golden years with a $1 million nest egg to retire comfortable (though that certainly wouldn't hurt). But make sure to have some income outside of Social Security so you don't wind up struggling financially.