36% of American retirees say they collect less Social Security income than they expected — here's why that's a big problem and 3 tips to avoid it

When it comes to the notion of “expectation vs. reality” — especially as it applies to disillusion in retirement — numbers truly tell the story, as reported in a study by Nationwide.

In its December 2023 Nationwide Peak Retirement Survey Insights Report, the insurance and financial services company found that basic living expenses take up more than half (53%) of retirees’ budgets. Yet workers expect these expenses to average out at just 42%, and what’s more, Social Security payments in many cases fall short of what they hoped to see.

In more than a third of instances (36%), retirees reported that they receive less in Social Security benefits than expected, compared to the 9% who say they receive more and 56% who collect about what they anticipated. And that 36% could grow. Social Security is expected to run out of cash by 2033, at which point benefits may no longer be paid in full.

It's projected Social Security benefits would be cut by 23%. In dollars and cents, annual benefits would be cut by $17,400 for a typical newly retired dual-income couple, according to the Committee for a Responsible Federal Budget. That impact would amount to “a lot” for 71% of people in pre-retirement and roughly three-in-four currently retired (74%), per Nationwide.

That could spell big trouble for the next generation of retirees counting on Social Security to ease their financial burdens. Using the figure of $1,940 — the median amount for a rental in Chicago, as reported by Zillow — that $17,000-plus represents the equivalent of nine months of payments at today’s prices.

Yet retirees and those about to join them can do plenty to offset any cuts that might occur. Assuming that the U.S. House of Representatives and Senate fail to address the Social Security funding problem — hardly a far-fetched scenario in these days of gridlock and squabbling — here are three ways to head off any potential cash crunch.