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3 Reasons to Rely Less on Social Security

Social Security helps many retirees stay afloat financially. And because of this, many seniors routinely rely on Social Security to cover the bulk of their bills.

If that's your plan for retirement, though, you may end up regretting it — and struggling financially for many years. You don't have to write off the idea of collecting Social Security completely. But here's why you may want to rely less on Social Security for your senior years.

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1. You won't get close to replacing your pre-retirement paycheck

Many people assume that Social Security is designed to replace their income entirely. Not so. The monthly benefit you'll be eligible for will hinge on your earnings history, but that check will only take the place of about 40% of your pre-retirement income — and that assumes you're an average wage earner, not a higher-income one.

Meanwhile, it's common for seniors to need around 70% to 80% of their pre-retirement income to live comfortably. There's obviously some wiggle room there, and you can certainly choose to live frugally if it takes some of the pressure off to save. But if you retire on Social Security alone, you might end up taking a serious pay cut — and suffering with money woes, as a result.

2. Benefits could get slashed

Social Security is facing some serious financial problems. In the coming years, it expects to owe more in scheduled benefits than it collects in revenue. While it has trust funds it can tap temporarily to make up that difference, once those cash reserves run dry, benefit cuts could be on the table.

If that were to happen, Social Security would no longer be in a position to replace about 40% of the average worker's pre-retirement paycheck. Instead, it would replace an even smaller percentage. And in the absence of savings, that could be downright catastrophic.

3. You may be forced to file for benefits early

You can sign up for Social Security once you turn 62. But you're not entitled to your full monthly benefit, based on your wage history, until full retirement age, or FRA, which is either 66, 67, or somewhere in the middle, depending on when you were born.

If you file for benefits ahead of FRA, your monthly payments will be reduced. But you might land in a position where you're forced to claim Social Security early, such as if you lose your job and can't find a new one. And if you don't have savings as a backup to compensate for a personal benefit cut, you might really have a hard time keeping up with your expenses.

Depend less on Social Security

There's nothing wrong with assuming that Social Security will provide a chunk of your retirement income, but don't assume it will be your main source. Instead, work hard to build a nest egg so you have personal savings to tap into later in life.

You don't necessarily need to part with a huge chunk of your paycheck to amass a nice amount of savings, either. Start by socking away $200 a month in an IRA or 401(k) plan, and then ramp up as you can. You're apt to be thankful for that extra money once you realize how limited your buying power under Social Security might be.

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