While Social Security can be an important source of income after you leave the workforce for good, it isn’t without its flaws. Being prepared with a good understanding of the realities of this benefits program, which are discussed below, can help you plan for retirement in a smart and informed way.

Social Security Replaces a Fraction of Pre-Retirement Income

The benefits program replaces only about 40% of your former paycheck. Without a decent nest egg, you’re likely to feel the discrepancy fast. Plan to have enough money from sources such as a pension or savings to replace at least 80% of your pre-retirement income so your quality of life doesn’t suffer.

Social Security Benefits May Be Taxable

Due to the fact that many retirees have combined income from social security and other sources, about 50% of retirees are pushed above the thresholds for taxes to kick in. This results in owing some federal taxes on their Social Security benefits. The thresholds—$25,000 for single people and $32,000 for married joint filers—aren’t indexed to inflation. In the coming years, it’s expected that the natural wage increase will bump even more retirees with provisional incomes above the stated thresholds.

Medicare Premiums Are Taken Out of Your Social Security

If you’re enrolled in Social Security, your Medicare Part B—the portion of Medicare that provides standard health insurance—will be paid from your benefits automatically. The good news is that you generally don’t need to worry about missing a payment, but this reality might take some retirees by surprise if they were previously unaware.

Collect Early and You Could Miss Out

You can begin collecting benefits as early as age 62, but you will receive a permanently reduced benefit. However, if you wait until your full retirement age, you will be entitled to your standard benefit amount. Full retirement age varies by birth year, but it ranges between 66 and 2 months and 67 years old. If you are unaware of your full retirement age or that claiming early can reduce your benefits, you could slash your benefit by as much as 30%.