Many people assume that once they retire, they'll manage to live on income received from Social Security. But will that really be the case?

If you're convinced you can manage on Social Security alone, consider this: In 2021, the average senior will receive $1,543 a month in benefits, factoring in the 1.3% cost-of-living adjustment (COLA) set to take place in the new year. Before that COLA, the average monthly benefit sits at just $1,523.

This just an average. It could be that you're entitled to a higher Social Security benefit than the typical senior based on your earnings history. If you're an average wage earner who expects to retire on Social Security alone, you may want to rethink that plan. Otherwise, you risk ending up cash-strapped later in life.

Older person at desk looking at piece of paper in hand and scratching head

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Why Social Security just won't cut it

Social Security may provide a substantial chunk of income for you as a senior, but it shouldn't be your only source. If you're not convinced, ask yourself: Could you really live on $1,543 a month, or $18,516 a year? If not, you'll need to secure additional income streams to avoid money problems during retirement.

You have several choices. You could plan to work part time, for example. Many seniors do so for the financial benefits as well as the social ones. A job you like will occupy some time without requiring you to spend money.

If you're a homeowner, you can supplement your Social Security benefits with rental income. If you have a finished garage or basement and your local zoning laws allow for it, you could rent out that part of your home and use the money to cover living expenses.

While both of these ideas could work, they're not guaranteed. You might struggle to find a part-time job that works for you, and you may encounter health or mobility issues that make working difficult. Furthermore, you could face roadblocks when attempting to rent out your home, like zoning restrictions.

If you're eager to secure income outside of Social Security for retirement, your best bet may be to save for that period in a dedicated account, like an IRA or 401(k). That way, the extra money will be there for you, without your having to rely on your ability to work or secure a tenant.

Many people struggle to make room in their budgets for retirement plan contributions. If you manage to sock away just $300 a month over 30 years, you'll accumulate $340,000 if the investments in your account assuming it generates an average annual 7% return (which is reasonable for a stock-heavy investment mix). Make it $400 a month, and you'll have $453,000 to your name.

Lovely as it would be for Social Security to provide enough income to live on, for most people, that's just not the case. The sooner you realize that, the sooner you can begin saving up enough money to enjoy retirement.