3 Reasons You Can't Bank On Social Security Alone for Your Retirement-and What to Do Instead

Social Security pays a monthly benefit to millions of retired seniors. And without that income, many would no likely be unable to cover their expenses in full.

But while it's OK to include your anticipated Social Security benefits in the course of your retirement planning, you shouldn't set yourself up to depend on them too heavily. Here's why.

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1. Your benefits won't offer as much replacement income as expected

If you earn an average salary, you can expect Social Security to replace about 40% of your pre-retirement income. But chances are, you'll need more income than that to live comfortably and cover your basic needs.

In fact, a general rule of thumb is that seniors should expect to need about 70% to 80% of their former income to manage their expenses without stress. So while Social Security might get you part of the way there, you'll need additional income to ensure that you're not left scrambling to cover your costs.

2. Your benefits may be cut in the future

In the coming years, Social Security is expected to owe more money in scheduled benefits than it collects in payroll taxes. That's because a large number of baby boomers are expected to age out of the workforce.

Social Security has trust funds it can tap to keep up with scheduled benefits for a period of time. But once those trust funds run dry, broad benefit cuts may be inevitable. And recent estimates have the program's combined trust funds running out of money by 2025.

This doesn't mean that Social Security cuts are guaranteed. There's a good chance lawmakers will try to step in and prevent those from happening knowing full well that broad cuts could lead to a widespread poverty crisis among the elderly. But those cuts can't be written off, either.

3. Your annual cost-of-living adjustments are likely to fail you

Social Security benefits are eligible for an annual cost-of-living adjustment (COLA), the purpose of which is to help seniors maintain their buying power as living costs rise over time. In fact, Social Security COLAs are tied directly to inflation, so you'd think they'd do a pretty good job of helping beneficiaries keep up with rising expenses.

Unfortunately, Social Security's COLAs have resulted in a major loss of buying power for seniors over the past 14 years. Since 2010, beneficiaries have seen their buying power decline by 20%, reports the nonpartisan Senior Citizens League.

Unless lawmakers change the way Social Security COLAs are calculated, this problem is likely to persist. So that's yet another reason to be careful about becoming too reliant on Social Security in retirement.

Have other income sources at your disposal

There's no need to write off Social Security completely in the course of your retirement planning. But you should also set yourself up with outside income so you're not left to struggle. Those outside income sources could include:

• An IRA or 401(k) plan you withdraw from for general bills
• An HSA you tap for healthcare expenses
• A rental property you own that generates income
• An investment portfolio that pays you dividends
• A part-time job you hold down or small business you run

If you're able to incorporate a few of these outside income sources into your retirement at the same time, even better. The more options you have, the more likely you are to thrive financially, no matter what happens to Social Security down the line.

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