12 to 15 Percent of Retirees Overly Rely on Social Security; Here's The Problem With That

"The Social Security Administration reports that among beneficiaries ages 65 and older, 12% of men and 15% of women rely on their monthly checks for 90% or more of their income. But that's a problem. See, you can expect Social Security to replace about 40% of your pre-retirement income if two things hold true - that you're an average earner, and that benefits aren't broadly cut in the future. Most retirees, however, need more like 70% to 80% of their former income to maintain a comfortable lifestyle."

"Now let's say you're someone who will be happy living on 70% of your pre-retirement paycheck. And let's say Social Security is able to take the place of 40% of that. This means you'll still need other income to bridge that gap. And if Social Security ends up constituting 90% or more of your retirement income, you could end up in a seriously bad situation."

Social Security will remain available, though future benefit cuts are possible but avoidable through legislative solutions. Social Security typically replaces about 40% of pre-retirement earnings for an average worker if benefits remain intact. Many retirees require roughly 70% to 80% of prior income to maintain their lifestyle, and a notable share of beneficiaries currently rely on Social Security for 90% or more of income. Overreliance on Social Security can create a large income shortfall in retirement. Building other income streams is essential. Options to supplement benefits include CD ladders and municipal bond ladders that can provide additional and potentially tax-advantaged income.

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