Social Security serves as the cornerstone of most Americans' retirement plans. More than half of retirees receive over half their income from the program. Still, for such a critical program, it's hard to get a decent handle on how much you'll receive before you file to collect. By far, the best source of your estimated benefit comes from Social Security itself, via your personalized statement that you can download from a My Social Security account.

If you create an account and check on your own estimated benefit, however, chances are that the headline number at the top of your statement is higher than what you'll likely receive. That's especially true if you're working and below age 62, the youngest age when you can start collecting retirement benefits. That raises a key question: Is Social Security lying to you? Or is its benefit calculation simply so complicated that nobody can get a good handle on it until you actually sit down to file for benefits?

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The key guesses that go into your benefit estimate

Your Social Security benefit is personalized based on your earnings history. Three key factors play into how much you're projected to receive: how much you earn over your lifetime, when you earn that money, and what age you are when you start collecting. When Social Security projects your headline benefit estimate, it has to guess at all three of those factors.

Its crystal ball is no better than yours, so it makes a very straightforward set of assumptions. It looks at what you earned in the most recent year it has on record for you and assumes you'll continue to earn that same amount every year until you reach your full retirement age.

That headline estimate also presumes that Social Security will be able to continue paying its full projected benefits. Unfortunately, that may not be possible as the program's trust funds are expected to empty by 2035, which would slash benefits to around 79% of projected amounts.

Why that headline estimate is likely too high

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There are several problems with those estimates. First and foremost, age 62 is the most common age to start collecting Social Security retirement benefits. When you collect your benefits before your retirement age, they're reduced. According to Social Security, they can be cut by as much as 30%, which is enough to turn a projected $2,000 per month benefit into $1,400. 

As if that weren't enough, your Social Security benefit is based on the highest 35 years of your covered earnings. Replace some of those projected higher earnings years with zeros, and it will lower your benefit even further. In Social Security's own projection for mid-career earners, that knocks another couple of percentage points off the forecasted benefit. 

In addition, structurally speaking, Social Security will be unable to meet its obligations once its trust funds empty. As a result, that additional anticipated 21% cut in benefits is very likely in your future unless Congress takes action to shore up the program. Note that prior attempts to improve Social Security's future have resulted in a combination of tax hikes and benefit cuts. That suggests the path by which you'll likely pay for future repairs as well.

Put all those factors together, and there's a very good chance that your actual Social Security benefit will wind up being around 50% to 60% of what Social Security projects as your benefit. Fortunately, Social Security points out the drivers of all these risks in your personalized statement. Social Security isn't lying to you on that statement, but you need to take care to read beyond your headline projection to get the full picture of what you're really likely to receive.

What you can do about it

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The key to having a financially successful retirement is remembering that Social Security was never designed to be your sole source of income once you cease working. As a result, even if its headline projection did match what you'll really get, you should have a plan in place to cover the parts of a comfortable retirement that Social Security won't. With an adequate plan in place, making adjustments for Social Security's shortfalls becomes a fairly straightforward task.

A decent planning guideline is known as the 4% rule. With that guideline, you can withdraw 4% of your portfolio balance in the first year of your retirement and adjust your withdrawals for inflation each year after that. According to the plan's author, assuming you have a well-diversified portfolio, with that plan, you have a strong chance of seeing your money last at least as long as a 30-year retirement. Based on that plan, you'd need a portfolio 25 times your first year's needs in order to retire comfortably.

If you were planning for your portfolio to cover $3,000 a month worth of expenses, you'd need a portfolio of $900,000 to make it work. If you instead need that portfolio to cover $3,500 worth of monthly expenses because you're worried about Social Security not covering as much as you hoped, that balance would need to be $1,050,000.

Although that's a $150,000 gap, it also represents less than two years' worth of compounding at the market's long-term historical rate. That makes it feasible to cover by some combination of saving a little bit more early in your career and/or having patience later in your career.

Get started now

On the flip side, doing nothing but waiting to get "surprised" by Social Security's benefits not quite measuring up to what you had hoped will put you in a bad situation in retirement. By that time, you're no longer working to earn income, and if you don't have a sufficient nest egg, compounding won't work on your behalf to cover the gap.

As a result, the sooner you get started investing to cover your retirement needs that Social Security won't, the better your chances of having the resources you need when you need them. So get started now, and improve the odds that you will find financial comfort during your retirement.