Millions of seniors look to Social Security as their primary income source, and the program is instrumental in keeping a large number of retirees afloat. But make no mistake about it: Social Security is far from perfect. Here are a few inherent flaws with the program today.

1. Benefits may be reduced universally in the future

Social Security will soon face a scenario where it owes more in benefits than it collects in revenue. We can attribute that to baby boomers' mass workforce exodus, coupled with the fact that younger workers aren't replacing them quickly enough.

Four Social Security cards loosely stacked.


Right now Social Security has access to trust funds it can tap when it needs extra money to keep up with its obligations. Those funds, however, are expected to run dry come 2035, at which point recipients could be looking at as much as a 20% reduction in their monthly benefits. And that's just based on current projections -- it's too soon to know just how badly benefits may be slashed. As such, it's awfully difficult for today's workers to estimate how much income they'll collect in the future, which poses a challenge in the course of retirement planning.

2. It's easy to lower your benefits by filing early

Social Security recipients are entitled to their full monthly benefit, based on their earnings record, upon reaching full retirement age. That age is either 66, 67, or somewhere in between, depending on year of birth.

But seniors are given a lot of leeway when it comes to claiming benefits, and that's both a good thing and a bad thing. Specifically, you can file for benefits as early as age 62, but for each month you start collecting Social Security before full retirement age, your benefits get reduced on a permanent basis. And if you file at 62 when you're not entitled to your full monthly benefit until 67, you reduce your monthly income by a whopping 30%.

Of course, seniors who hold off on filing for benefits don't subject themselves to a harsh reduction in income. But the Social Security Administration makes it almost too easy to slash benefits by making them so readily available early on. Remember, you don't need a reason to claim Social Security early, and many seniors who file ahead of full retirement age do so because of a lack of understanding or information, and then struggle financially for years afterward.

3. Your benefits will only replace a small portion of your former income

Many people are wired to think that Social Security alone will provide enough income for them to live comfortably. But generally, that's not true. Social Security will replace about 40% of the average person's preretirement wages, but most seniors need more like 70% to 80% of their former earnings to maintain a decent lifestyle.

Furthermore, Social Security's annual cost-of-living adjustments, or COLAs, have, in recent years, done an extremely poor job of helping seniors maintain financial stability in the face of rising living costs. In fact, it's estimated that benefits have lost 33% of their buying power over roughly the past 20 years.

Be realistic about Social Security

If you're looking forward to collecting Social Security, there's no reason to write off those benefits entirely or get too down on the fact that you can't live on them alone. But what you should do is be realistic about the lifestyle those benefits will buy you if you don't have other income sources to rely on -- especially if you wind up filing early, or if benefit cuts end up happening in the not-so-distant future.