Social Security is in trouble. The trust funds it relies on to bridge revenue gaps are set to run dry by 2035. Once that happens, the program may have no choice but to cut benefits unless Congress steps in with a fix. The reduction currently on the table is 20%, but since 2035 is a good 15 years away, that percentage has the potential to climb.

Despite all of this, Social Security is not, in fact, going bankrupt. The program's primary source of revenue is payroll taxes. Workers currently pay taxes on up to $137,700 in annual earnings at a rate of 12.4%. Those who are salaried employees pay half that amount, with their employers covering the rest. Self-employed workers, meanwhile, are liable for the entire 12.4%.

A Social Security card


Social Security also collects revenue in the form of taxation on benefits. Seniors whose provisional income (half their yearly benefits plus all of their non-Social Security income) exceeds $25,000 in the case of single tax filers, or $32,000 in the case of joint filers, have their benefits taxed to some degree.

Therefore, even if the program's trust funds do indeed run out in the not-so-distant future, Social Security will still have the money on hand to largely keep up with its benefits. But in spite of that, there's a danger in relying too heavily on Social Security, and if you put too much weight on those benefits, you're likely to struggle in retirement.

Social Security can't fund your golden years

Even if benefit cuts don't come to Social Security, you still need outside income to stay afloat financially. The average senior today on Social Security collects roughly $18,000 a year. That may be enough to get by if you have a modest pension to collect and your living expenses are very low. But if you don't have that pension, and you're not looking to downgrade your lifestyle, then you'll need independent savings to bridge the gap between the income level you need to live comfortably and what Social Security will provide you with.

Just how much savings will it take to buy yourself a secure retirement? There are different estimates out there, but 10 times your ending salary is a decent rule of thumb. As such, if you think you'll be closing out your career earning $60,000 annually, then your ideal savings target is $600,000.

Clearly, that's a large sum of money. But if you still have time between now and retirement, you have an opportunity to hit that goal, or at least come close.

Right now, you can sock away up to $7,000 a year in an IRA if you're at least 50. If you have a 401(k), your annual contributions top out at $26,000 if you're 50 or older. Now if you're not in the habit of setting funds aside for retirement, then it's doubtful you'd be able to start maxing out a 401(k) overnight. But let's say you do make substantial lifestyle changes that allow you to free up $1,000 a month for retirement savings. If you were to sock that money away for the next 18 years, and invest it at an average annual 8% return, which is just below the stock market's average, you'd wind up with about $550,000.

Of course, maybe a $1,000 monthly savings contribution isn't attainable for you. Or perhaps you don't have access to a 401(k) and therefore can't sock away that much money in a tax-efficient manner. But even if you scale back to $500 a month, assuming that same savings window and return, you'll be looking at a nest egg of around $275,000. And that's also not bad.

While Social Security is not at risk of going broke, it shouldn't be your sole retirement income source. And if benefits do face cuts, you'll get even less money from it. The best way to avoid hurting financially later in life is to actively build savings of your own and be less reliant on the benefits you stand to collect.