There Is A Social Security Change in 2026 That Could Cost Retirees Thousands If They’re Not Prepared

If you were born in 1960 or later, your full retirement age for Social Security is now 67. That might not sound like breaking news, but the way this rule interacts with the 2.5% COLA adjustment for 2026 and the new $22,320 earnings limit creates real financial consequences for people who claim benefits without understanding the timing.

Many retirees still think of 65 as the magic retirement age, or assume 62 is close enough. Claiming at 62 instead of waiting until 67 permanently reduces your monthly benefit by roughly 30%. On a $2,000 monthly benefit, that is $600 less every month for the rest of your life. Over 20 years, that is $144,000 you never recover.

The Earnings Limit Catches People Off Guard

If you claim before your full retirement age and continue working, you lose $1 in benefits for every $2 you earn above $22,320 in 2026. This still trips up people who assume they can claim early and keep working without penalty.

Say you claim at 63, receive $1,400 per month, and earn $40,000 from part-time work. You are $17,680 over the limit, which means Social Security withholds $8,840 in benefits, wiping out more than six months of payments. The money is not gone forever—Social Security recalculates your benefit at full retirement age to account for withheld months—but in the meantime, you are getting less income than you planned for.

The COLA Adjustment Matters More Than You Think

The 2.5% COLA for 2026 applies to your actual benefit amount. If you claimed early and locked in a permanently reduced benefit, that 2.5% increase applies to the smaller number. Someone receiving $1,400 per month gets a $35 raise. Someone who waited and receives $2,000 per month gets $50. That gap compounds every year.

Inflation has been running at 1.82% based on Core PCE data through November 2025, meaning the COLA is slightly above the Fed’s preferred inflation measure. But healthcare spending grew 6.9% from January to November 2025, and that is the category that hits retirees hardest. A 2.5% benefit increase does not keep pace with medical costs if healthcare takes a meaningful share of your budget.

What This Means for Your Decision

If you are approaching 62 and considering claiming early, run the math on your specific situation. If you plan to keep working, the earnings limit will reduce your benefit more than you expect. If you have other income or savings to draw from, waiting until 67 delivers a 30% larger benefit for life, and every future COLA applies to that higher base.

The hardest mistake to undo is claiming too early without understanding the permanent reduction. Once you start benefits, you cannot reclaim them at full retirement age except in very limited circumstances. Decisions made now shape your income for the next 20 or 30 years.