Social Security benefits are at the heart of retirement planning for nearly all Americans, but too many retirees unknowingly minimize lifetime benefits with unnecessary blunders. Though the 2026 cost-of-living adjustment (COLA) is expected to add around 2.4% to benefits, the inflationary increase does not compensate for structural losses due to error claims. In this article, we discuss four widespread pitfalls that lower benefits for life and why the COLA won’t correct them.
1. Prematurely taking benefits: A perpetual reduction trap
The most damaging mistake is taking Social Security before Full Retirement Age (FRA). FRA for individuals born after 1960 is 67. Taking it at 62 means a 30% cut in monthly benefits, as specified on the Social Security Administration’s reduction chart of benefits. A $1,000 benefit at FRA, for instance, becomes $700 if taken at age 62. It is a permanent reduction that lasts throughout retirement.
The 2026 COLA would apply only to the reduced benefit. A 2.4% raise on a benefit of $700 will add only $16.80 a month, while delayed retirement to FRA would have maintained the entire $1,000 base (which will get a $24 COLA boost).
Once taken early, the lower benefit sets a reduced trajectory that COLAs cannot reverse.
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2. Forgetting the 35-year earnings rule: Zeroes count more than you think
Social Security bases benefits on the highest 35 inflation-indexed years of earnings. Most employees are tricked into thinking that 35 years of working experience translates to highest benefits. When an individual works less than 35 years, the Social Security Administration substitutes $0 in earnings for each missing year, lowering the average.
Even individuals with a full 35-year record can benefit by working additional years at higher income levels, which can replace lower-earning years and boost their final benefit. For example, someone with 39 years of earnings can discard the four lowest years, increasing their average. Post-35 earnings can significantly improve benefits, especially if income increases later in life.
For instance, a retiree with 39 years of earnings history can have their first four years removed. If they are zeros because they were not actively working since retirement, they are irrelevant. But post-35 years work with higher-than-average income keeps low-income years in the background and adds to benefits. The 2026 COLA increases benefits proportionately higher but does not recompute the base benefit based on the earnings record.
3. Misinterpretation of spousal benefits: Coordination is the solution
Spousal benefits enable individuals to earn up to 50% of their spouse’s FRA benefit. Early claiming, however, decreases individual and spousal benefits for life. A spouse, for instance, entitled to a $500 spousal benefit at FRA would receive $325 if they file at age 62.
Furthermore, a spouse cannot claim a spousal benefit until the higher-earning partner files, complicating timing and coordination. The COLA applies to whatever reduced amount is being received—so a 2.4% increase on $325 yields only $7.80 monthly, compared to $12 if the full $500 benefit had been preserved.
Survivor benefits are also reduced if claimed before FRA, compounding the long-term loss.
The COLA increase is calculated on the lowered spousal rate, not on the initial 50% amount. Adding 2.4% to $325 produces a $7.80 monthly increase, rather than waiting until FRA and having the $500 base (and increasing COLA by $12). Survivor benefits that are higher than spousal benefits are similarly reduced if taken early.
4. Ignoring the earnings test: Working while taking early
Retirees who work and draw benefits before FRA pay steep penalty prices if they earn above $23,400 annually (2025 level). Each additional $2 earned above the threshold has $1 deducted from benefits. While these withheld funds are repaid to some extent after FRA in the recalculation of benefits, the initial deduction can strain finances.
The earnings test does not kick in after FRA but puts earlier claimants working at the mercy of temporary benefit cessations. For instance, a retiree who in 2025 is making $30,000 would forfeit $3,300 of benefits ($6,600 threshold ÷ 2). The 2026 COLA does not change the earnings limit nor reduce this penalty, leaving impacted retirees with diminished lifetime benefits.
Why the 2026 COLA adjustment falls short
The estimated 2.4% COLA increase is an inflation figure derived from the CPI-W index. Although this adjustment maintains retirement buying power, it does not counter benefit reductions outlined above at their origin. COLAs are credited proportionally to reduced benefits, so early filers and individuals with less earning histories will always trail their groups that maximized their filing strategy. For instance, a 30% cut and a 2.4% COLA still reduces the beneficiary’s benefit by 28.3% less than his or her FRA benefit.
Avoiding these four mistakes requires careful planning: delaying benefits until FRA (or age 70 for maximum credits), maximizing lifetime earnings, coordinating spousal claims, and understanding work penalties. Tools like the Social Security Administration’s Retirement Planner and third-party calculators can help model scenarios. While the 2026 COLA provides temporary relief, it cannot undo permanent reductions—making informed decisions today is the only reliable way to safeguard tomorrow’s benefits.
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