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3 Reasons Your Social Security Benefits Will Disappoint You

By Maurie Backman - Feb 17, 2020 at 6:04AM

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Don't get too excited over those benefits just yet.

Many workers look forward to collecting Social Security in retirement, and understandably so. After years of paying Social Security taxes on your income, you deserve to finally get something out of it.

But before you get too excited about those monthly benefits, you may want to give yourself a reality check. Here are a few reasons why you're likely to end up disappointed in Social Security once those benefits finally come your way.

1. Those benefits will only replace a small chunk of the income you're used to

Many people assume they'll be able to live on Social Security once they retire. But without additional income sources, you're likely to struggle financially.

Your Social Security benefits will replace about 40% of your pre-retirement income, assuming you're an average earner, but most seniors need roughly double that sum to enjoy a comfortable lifestyle. Or to put it in terms of dollars, the average senior on Social Security today only collects about $1,500 a month, and chances are, that's not nearly enough to pay all of your ongoing expenses in retirement, even if you scale back from your current level of spending.

Loosely stacked Social Security cards


2. Benefits may get cut in the future

An across-the-board reduction in Social Security benefits is not set in stone -- but it's a strong possibility. The program's trust fund, which it can use to access money when its incoming revenue doesn't suffice in keeping up with its financial obligations, is expected to run dry by 2035.

At that point, Social Security is expected to owe more money in benefits than it will have coming in via payroll taxes, so the program may be forced to implement cuts due to a lack of funds. Of course, there's a chance that Congress will step in and address the program's financial woes, but thus far, no official solution has been implemented.

3. Seniors on Social Security consistently lose buying power

The monthly Social Security benefit you start out collecting in retirement won't be the exact same benefit you receive for life, thanks to the program's annual cost-of-living adjustments, or COLAs. The purpose of a COLA is to help seniors retain their buying power in the face of inflation.

But data from the Senior Citizens League reveals that since the year 2000, beneficiaries have lost an estimated 33% of their buying power. Keep in mind that even when COLAs are relatively generous, they're often wiped out by Medicare premium hikes, making them a somewhat ineffective means of buying seniors long-term financial security.

Don't get burned by Social Security

Having a realistic view of Social Security will help you better plan for retirement and avoid financial struggles throughout it. Now that you know that Social Security won't provide enough income to live on, may get cut, and does a poor job of combatting inflation, you can compensate by saving independently. The more money you sock away in your IRA or 401(k) for retirement, the less you'll depend on Social Security once your career wraps up and the paycheck you once relied on to pay your bills goes away for good.

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