When you think about all the money you’ve paid into the Social Security system over the years, it’s a significant amount. Between your contributions and your employer’s, a total of 12.4% comes out of your paycheck. In some cases, the amount you’ve paid into Social Security may even make your retirement savings look relatively small.
However, in this article, we’ll explain why you should not rely solely on Social Security income. We’ll also discuss how the most successful retirees integrate their Social Security benefits with investment income, retirement accounts, and other assets to help create long-term financial stability in retirement. Watch the video below or scroll down to learn more.
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If you retire from a traditional job, retiring means that you stop receiving your regular paycheck. For most retirees, their earnings are typically at their highest in their pre-retirement years, so the paycheck they lose may be larger than their Social Security benefits when they start claiming them. Social Security retirement income is not designed to replace your full working income.
In fact, Social Security payments have caps on how much you can receive. Those limits are based on how many years you paid into the system and the amount you contributed. In general, the higher your salary was and the more years you paid in, the larger your retirement benefit is likely to be. If you have a spouse, this could be a meaningful amount. Imagine if you both receive a combined $6,000 in monthly Social Security benefits. That’s a strong foundational income for retirement!
That is why it is essential to have a well-thought-out plan for when to take your Social Security benefits, since the timing you choose affects how much you receive over time. If you take benefits too early or wait too long, you might be leaving a lot of money on the table. You could also face penalties if you start taking Social Security payments while you’re still earning a traditional income. With all these nuances, it can be beneficial to have a strategic claiming plan in place.
You also have to remember that there is a limit to how much you’ll receive from Social Security. It may not cover all your expenses or everything you plan to do in retirement. You should consider how to supplement your income through investment portfolios, employer-sponsored retirement plans, annuities, or rental income to maintain your desired lifestyle.
Another thing to be aware of: Social Security benefits may be subject to taxation. Most retirees owe taxes on up to 85% of their Social Security benefits, depending on their total income and IRS tax bracket. This is why your retirement income strategy plays a crucial role in helping you manage your tax liabilities. By structuring your income strategically, you may be able to keep yourself in a lower tax bracket.
You can estimate your potential Social Security benefits by visiting the Social Security Administration’s website (ssa.gov). There, you can log into your account and review your estimated benefits at various claiming ages. However, when reviewing these statements, remember that the listed figures represent pre-tax amounts. You’ll need to factor in taxes and other deductions to determine your net benefit.
If you will be on Medicare, as most retirees are, you also need to account for Medicare premiums, which are often deducted directly from monthly Social Security benefits. Since Medicare premiums are determined by income, higher earners pay more. Between Medicare Part B and D premiums, drug copays, and supplemental Medicare plans, retirees can face substantial healthcare expenses each year. These costs can significantly reduce the net amount you take home from Social Security.
With these financial factors in mind, it is advisable to evaluate your claiming strategy carefully. Assessing your future tax liabilities and potential deductions can help you determine when to take Social Security and how to coordinate your retirement income sources for greater financial efficiency.
REAP Financial Reader Question Response
During our YouTube videos and in the comments of our articles, we ask people to share their questions. You can find the answers to those questions here! If you have a question, be sure to leave it below so we can address it in our future content!
Social Security disability has different parameters. If you’re a non-blind person, in 2025, the limit starts at around $1,600 per month. If you’re a blind person, the limit increases to approximately $2,700 per month. In both cases, it is not a lot, and they’ll start docking those benefits pretty quickly. Often, people receive Social Security disability when something happens, and then when they try to return to the workforce, those benefits get cut. Be aware that these limits exist and that they tend to rise each year, as they’re indexed for inflation.
Another reason you should not rely solely on Social Security is that your retirement budget is actually the most important number in your financial plan. It represents how much you’ll need to withdraw each month to maintain your standard of living. For many people, this figure is larger than expected. Since many people don’t follow a budget while working, it can be difficult to develop the habit in retirement.
However, when you’re in retirement, managing your cash flow becomes essential. Social Security does include a Cost of Living Adjustment (COLA) each year, designed to offset inflation. However, COLAs have historically fallen short of actual inflation because the Consumer Price Index (CPI) does not account for certain key expenses, such as healthcare costs. While you may receive a benefit increase each year, it may not be enough to fully cover rising costs. That’s why it is crucial to have additional assets and investment vehicles that outpace inflation.
As you age in retirement, you may require long-term care, nursing home services, or home health care. However, Social Security benefits do not include additional funds for these expenses. Additionally, Medicare typically does not cover long-term care facilities, which means many retirees must pay out of pocket.
You should also consider that future benefits may be adjusted. While we don’t want to cause concern, the fine print on Social Security statements notes that if no legislative changes are made before 2034, benefits may be reduced by approximately 25%. While modifications to the system are expected, the exact details remain uncertain.
A ~25% reduction would substantially impact many retirees’ financial stability. While no one can predict how Social Security will change, it’s wise to build a comprehensive retirement plan that doesn’t rely solely on these benefits.
Plan for a Secure Retirement with REAP Financial
Social Security is an important part of retirement income, but it should be supplemented with other assets and financial strategies to help you maintain long-term security. At REAP Financial, we specialize in retirement planning, tax strategies, and financial planning services for high-net-worth individuals and families.
Our fiduciary financial advisers in Austin, Texas, work closely with you to develop a personalized retirement strategy that maximizes your income, minimizes tax liabilities, and helps you maintain financial independence.
Schedule a consultation today to discuss how we can help you build a retirement plan that goes beyond Social Security.
Let us help you navigate the changes ahead and ensure your retirement plan stays on track.
Contact Us
Phone: (512) 249-7300
Email: retire@reapfinancial.com
Office Address: 9414 Anderson Mill Rd #100, Austin, TX 78729
Chris Heerlein, a Texas native, is the CEO of REAP Financial and founder of REAP Private Client Group (RPCG), specializing in wealth creation, preservation, and growth for affluent individuals, business owners, and executives. RPCG provides expert financial and investment advice, advanced tax strategies, business succession planning, and unparalleled client service. Chris is a trusted financial advisor, author of Divorce With Dignity (2019) and Money Won’t Buy Happiness But Time to Find It (2017), and a columnist for Kiplinger Personal Finance Magazine.
He has been featured in Fortune, Money Magazine, Bloomberg Businessweek, and U.S. News & World Report. Chris also hosts Wealth Radio on NewsRadio KLBJ and is a sought-after speaker. Based in Austin, Texas, he lives with his wife, Hannah, and their three children and actively supports charitable causes.
