Here’s why I refuse to count on Social Security alone in retirement

Social Security is a major source of retirement income for tens of millions of older Americans, and I’m certainly not going to be an exception. I’ve been paying into Social Security since I was 15 years old and should get a nice monthly benefit once I eventually decide to claim it.
Having said that, just because I’m anticipating a Social Security benefit after I retire doesn’t mean that I’m counting on it exclusively, or even for the majority of my income in retirement. Here’s why, and two major steps I’m taking to make sure I have the type of financial flexibility in retirement that I want.
Social Security is designed to replace about 40% of the average American worker’s pre-retirement income. Meanwhile, retirement planners generally suggest that you’ll need about 80% of your income to maintain the same quality of life after you retire. In other words, for the average person reading this, Social Security should cover roughly half of your retirement income needs.
Now, I’m not saying that I don’t think Social Security will be there when I retire in about 20 to 25 years. It almost certainly will be.
However, there’s a significant chance that there will be some changes made between now and then to keep the program solvent. According to the most recent Social Security Trustees’ report, the trust funds that hold Social Security’s reserves are expected to be depleted by 2035. After that time, the incoming payroll tax revenue and other income will be enough to cover 83% of promised benefits.
This means that we could see an across-the-board 17% benefit cut if nothing is done. But the most likely scenario is that something will happen between now and 2035 to fix things, and this could include an increase in the retirement age or reduced benefits for higher-income individuals.
The point is that while I can see a projection of my expected Social Security benefit by viewing my annual statement at ssa.gov, there’s no guarantee that there won’t be some sort of reduction. So I shouldn’t rely too heavily on the promise of that income.
As a final reason, while it’s certainly possible to live on Social Security alone after retirement — many people do — it isn’t likely to result in true financial freedom. I aim to not only retire when I’m young and mobile enough to enjoy my time, but I also want to travel extensively, dine out when I want to, and more. And all of that costs money.
It comes down to a question of whether I simply want to survive during my retirement or whether I want to thoroughly enjoy it. And I’m choosing the latter.
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To be clear, I value Social Security very highly as a component of my retirement strategy. After all, unless I purchase some sort of annuity, which is unlikely, Social Security will be my largest source of inflation-protected retirement income. But I look at Social Security as just one piece of the puzzle when it comes to creating a secure retirement.
I have a couple of other major retirement strategies in the works. The first is also the most obvious – saving in retirement accounts. Because I’m technically self-employed, I use a SEP-IRA to save for retirement and contribute at least 10% to 15% of my income to it.
Another component of my retirement strategy is to pay down debt as much as possible. I aim to not only reach retirement without any car payments, but my goal is to have my mortgage completely paid off as well. One very important point to keep in mind is that it isn’t just about how much you’ve saved or how much retirement income you have. It’s also about how much your cost of living is. If I don’t have to worry about mortgage payments, my financial comfort level will be significantly greater.
The bottom line is that while Social Security is important, it isn’t a great idea to rely on it exclusively. Think of Social Security as one component of a complete retirement plan.
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