Personal Finance

The One Social Security Myth Retirees Can't Afford to Believe

Maurie Backman

Published: February 12, 2025 10:03 am

Social Security has been around for a really long time. And it’s also a program that’s filled with different rules.

Because of this, it stands to reason that over time, misinformation has leaked out about the program. But there’s one myth in particular that can be especially dangerous to buy into. And I’m here to share that myth so it doesn’t wreck your senior years.

Have realistic expectations

A lot of people assume that Social Security will replace their pre-retirement paychecks in full. But if you’re hoping the money Social Security pays you is the equivalent of your final paycheck at work, I have some bad news for you — that’s not even close to being true.

If you earn an average wage, you can expect Social Security to replace about 40% of your pre-retirement wages. So if you earn $80,000 a year, you might get $32,000 in Social Security benefits if you sign up at your full retirement age.

However, a 60% pay cut is pretty significant.

Sure, your expenses might go down in retirement, especially if you’re able to pay off your home before your career comes to an end. But that doesn’t mean you’ll be able to live on just 40% of what you used to make. So it’s important to have realistic expectations about the amount of money Social Security will give you.

Work with a financial advisor to establish savings goals

Unfortunately, some people go their entire careers without knowing that Social Security will only replace a portion of their paychecks. And people who adopt that line of thinking sometimes miss the opportunity to save for retirement on their own.

So now that you’re aware that Social Security won’t come close to replacing your wages in full, you can do something about it. I suggest sitting down with a financial advisor to develop a savings plan that helps you build a solid nest egg for retirement.

You’ll commonly hear that it’s a good idea to save 15% to 20% of your pay for retirement. But that’s not realistic for everyone.

Financial advisors recognize this. And a professional can work with you to establish a savings goal that’s reasonable based on your income and projected needs.

Just as importantly, a financial advisor can help you make the most of the money you’re saving for retirement by setting you up with the right investments. Those might include a mix of growth stocks or ETFs, as well as assets that produce income to add to your portfolio.

A financial advisor can also walk you through strategies to maximize your Social Security benefits. One option could include delaying your claim for a larger monthly payday.

In that situation, Social Security could end up replacing more than 40% of your pre-retirement wages. But you should not expect your benefits to replace 100% of what you used to earn, period. And the sooner you recognize that, the more opportunity you’ll have to save and avoid a financial crunch later in life.