Most Americans expect Social Security to be a major source of retirement income. Sadly, while you'll receive some benefits, the actual amount may disappoint you.

Here are three big reasons why.

Social Security card with money sitting on it.

Image source: Getty Images.

1. Many people are forced to claim benefits early

You can claim your Social Security benefits starting at 62, but must wait until 70 to get the largest benefit available. For each month you claim prior to your 70th birthday, you'll either face early filing penalties (if it's before your full retirement age) or will miss out on delayed retirement credits

Many hope to start benefits later to maximize their checks. But claiming earlier than planned is common due to health issues, job loss, family demands, or other uncontrollable circumstances. 

If you're forced to claim benefits before you anticipated, they can be substantially smaller than expected. For those with a full retirement age of 67, claiming at 62 shrinks monthly checks by 30% versus starting at full retirement age. 

2. A portion of your benefits may be taxed

It can be a shock to discover your Social Security benefits are subject to tax, but that's the reality for around 50% of beneficiaries.

You won't owe federal tax unless your countable income (half your Social Security benefits plus other taxable income and certain nontaxable income) is above $25,000 as a single filer or $32,000 as a joint filer. But once your income exceeds these levels, the table below shows the portion of your benefits that could become taxable. Unfortunately, these income thresholds aren't indexed to inflation, so more retirees will owe the IRS over time. 

Married Filing Jointly With Income of:

Married Filing Separately, Not Living With Your Spouse, With Income of:

Filing Under Another Tax Status With Income of:

Portion Benefits Subject to Tax:

Under $32,000


Under $25,000


$32,000 to $44,000


$25,000 to $34,000

Up to 50%

More than $44,000

Any amount

More than $34,000

Up to 85%

Source: IRS. N/A = not applicable.

And depending where you live, your state may also tax your benefits, significantly reducing the value of your retirement benefit. 

3. Cost-of-living increases don't actually keep pace with inflation

Even if you don't owe taxes and get the maximum benefit available, chances are good you'll still be disappointed with your checks -- especially after you've been retired for a while. That's because Social Security benefits have lost around a third of their buying power since 2000, so those who receive benefits today can't buy as much with them as seniors in the past. And the older you get, the more that buying power is likely to fall. 

Your benefits should be protected against inflation by periodic cost-of-living adjustments (COLAs). But these are based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), a group that generally has different spending habits than elderly Americans. 

CPI-W underestimates how much seniors spend in key categories often subject to higher rates of inflation, like healthcare and housing, while overestimating other expenses. So COLAs are often too small to allow retirees to maintain their standard of living. 

It's important to prepare for falling buying power, especially if you also get stuck paying taxes on your benefits and have to claim them earlier than anticipated. It can all add up to a far smaller check that leaves you disappointed. But with hefty retirement savings, at least you won't be left broke.