Why You Shouldn’t Rely Solely on Social Security for Retirement
Social Security is one of the most important income sources for retirees, but if you’re depending on it as your primary retirement paycheck, you could be setting yourself up for unnecessary stress. I’ve worked with countless retirees who were shocked by unexpected costs, taxes, and how quickly fixed income gets squeezed by inflation. Let’s talk about why it’s risky to rely too much on Social Security—and what you can do instead.
Social Security Wasn’t Meant to Be Your Whole Retirement Plan
Over 40% of retirees count on Social Security for at least half their income. That’s a problem. The program was never designed to fully fund your retirement—it was created to provide a foundation. That consistent monthly deposit can help with everyday expenses, but it doesn’t stretch well when surprises hit—like home repairs, medical bills, property taxes, or that bucket-list trip.
If you don’t have additional savings, these one-time expenses often go straight onto a credit card, adding unnecessary financial pressure.
Cost-of-Living Adjustments Don’t Always Keep Up
Social Security includes annual cost-of-living adjustments (COLAs), but they’re based on the Consumer Price Index (CPI), which reflects the spending habits of working adults—not retirees. That’s a major issue. Retirees spend more on housing, healthcare, and services—not on gas and electronics.
Worse, COLAs are delayed by a full year. So when inflation spikes (like it did in 2022), your benefits don’t increase until the following year. That lag time hurts, and over time, the gap between your actual expenses and your adjusted income widens.
Yes, Your Benefits Can Be Taxed
A lot of people don’t realize that Social Security benefits are taxable. It depends on your “provisional income,” which includes half of your Social Security benefits plus other income, like IRA withdrawals or pensions.
Here’s an example: A single retiree with $2,500/month in Social Security and $10,000/year in IRA withdrawals may not owe taxes at first. But over time, COLAs and rising withdrawals can push their income over the $25,000 threshold, triggering taxes on up to 85% of their benefits.
So even if your gross income rises with inflation, your net income can actually fall. That’s the kind of surprise no one wants in retirement.
Anxiety Over Social Security’s Future Is Real
Let’s be honest—many people are worried about whether Social Security will still be around in 10 or 20 years. The projections aren’t comforting: some forecasts suggest a 20% cut in benefits if no legislative action is taken.
That’s why I encourage clients to aim for peace of mind—not just survival. Relying too heavily on a system that’s under political and financial strain can cause real anxiety. Diversifying your income sources creates freedom and flexibility—two things we all want in retirement.
How to Supplement Your Social Security
So, what’s the plan? First, make the most of what Social Security offers. If you can delay claiming until age 70, you’ll maximize your monthly benefit. That extra income can give you a little breathing room for things like travel or unexpected bills.
Second, build up your savings and investment portfolio. Having supplemental income gives you options—you can dial up spending in good years and pull back during market dips. Flexibility is your financial superpower.
Third, think creatively about your biggest asset: your home. Downsizing, relocating to a lower-cost area, or even exploring a reverse mortgage (as a last resort) can free up cash. But remember, reverse mortgages should be considered cautiously—they’re a tool, not a first move.
The Bottom Line
Social Security is just one piece of your retirement puzzle. Don’t put all your eggs in that one basket. With a little planning and some smart moves, you can create a retirement that’s flexible, resilient, and—most importantly—stress-free.
You should always consult a financial, tax, or legal professional familiar about your unique circumstances before making any financial decisions. This material is intended for educational purposes only. Nothing in this material constitutes a solicitation for the sale or purchase of any securities. Any mentioned rates of return are historical or hypothetical in nature and are not a guarantee of future returns.
Past performance does not guarantee future performance. Future returns may be lower or higher. Investments involve risk. Investment values will fluctuate with market conditions, and security positions, when sold, may be worth less or more than their original cost.
