Around half of all older Americans aren't expecting much from Social Security. According to recent research from the Society of Actuaries, just 50% of pre-retirees expect their retirement benefits from this entitlement program to be a major source of income. 

On the one hand, this is good news -- if it means Americans are being realistic about what Social Security will do for them and are saving enough so they aren't overly reliant on these benefits. On the other hand, if Americans aren't ensuring they'll have plenty of money to supplement Social Security, underestimating the limited role these benefits will play in retirement could be damaging. 

Senior couple looking at paperwork with financial advisor.

Image source: Getty Images.

Are you being realistic about Social Security?

According to the same Society of Actuaries report, while only about half of pre-retirees think Social Security benefits will be a major source of income, 64% of current retirees describe their benefits that way. 

The likely reason for this discrepancy is that pre-retirees think they'll get more money from other sources than current retirees actually end up with. For example, 37% of pre-retirees expect employer-sponsored savings plans to be a major source of retirement income. But just 13% of current retirees indicate money from this type of workplace plan actually is a major source of their funds after retiring.

And while 53% of pre-retirees expect income from work to be either a major or minor source of retirement funds (including 11% who expect it to be a major source), only 18% of current retirees actually get any money from a job and just 4% describe their paychecks as one of their primary income sources. 

Chart showing expected vs. actual sources of income for current vs. future retirees.

Data source: Society of Actuaries; Table by author.

If you're anticipating you won't really need a lot of money from Social Security because you'll have a paycheck and will be able to take hefty distributions from your workplace retirement plan, you could end up in dire straits if you make decisions based on this premise and things don't work out as planned.

Say, for example, you claim Social Security benefits early and take the resulting hit to your checks (as much as 30% depending on how old you are when claiming and your full retirement age). You'll be stuck with a reduced benefit for life, which may not seem like a big deal if you assume you'll keep earning money for a long time. But it could become a huge problem if you're forced to quit work sooner than planned due to health issues, a lack of job opportunities, or family needs. 

Ideally, you'll save enough throughout your career that you can rely on Social Security to replace 40% or less of your pre-retirement income, which is what the benefits program is designed to do. Then, you'll be right in your assumption that your benefits won't be a major source of your retirement funds. But with today's retirees reporting median savings of around $45,000, chances are good a lot of Americans are going to find Social Security ends up being a primary income source even as average benefits are just about $18,168 per year

If you're near retirement, it's essential you take a realistic look at your savings and the income they will produce using a safe withdrawal rate. If you find it's unlikely to be enough to comfortably support you, take steps to increase your nest egg and do what you can to maximize your Social Security checks -- later in life, you may rely on them a lot more than you're expecting.