Disability Vs. Social Security Benefits at Retirement

By Jane Amar
If you become disabled at retirement age, you may prefer to file for Social Security Disability Insurance.

Making a financial plan image by Allen Stoner from Fotolia.com

Retirees can collect Social Security Retirement Insurance Benefits (RIB) as early as age 62. The Social Security Administration reduces retirement benefits according to the number of months it is paid out prior to full retirement age, which is now 66 for those born in the years 1943 to 1954. Generally, the total benefits collected for an extra 47 months from age 62 to 66 far exceed the loss from receiving a permanently reduced benefit. If you are disabled, however, you have the choice whether to apply for retirement, Social Security Disability Insurance (SSDI) benefits or, in some situations, both.

Disability Benefits

Receipt of disability benefits before full retirement age increases benefits permanently, rather than reducing them. The SSA normally averages the highest 35 years of earnings to calculate your retirement benefit. If you become disabled before age 62, Social Security drops out the number of years spent in part or whole on disability benefits, creating a higher average and higher benefits. Even if the disability occurs after age 62, your benefit will be higher because the SSA does not reduce SSDI benefits because you collect them before full retirement age.

Concurrent Eligibility

If you become disabled after age 62, but before full retirement age, the Social Security Administration will suggest filing for retirement and disability benefits. SSDI benefits have a five-month waiting period that begins with the first full month disabled. Social Security can pay you retirement benefits during this five-month period to provide income while awaiting the disability decision. When disability benefits begin, the receipt of five retirement benefit checks would reduce your disability benefits permanently by only about 2 percent. For example, if the full disability benefit is $1,325, the age 62 retirement benefit would be approximately $1,000. Receipt of five checks totaling $5,000 would permanently reduce your SSDI check by about $37. If you decline the $5,000 to get $37 more monthly, it will take you about 135 months to collect $5,000.

When Retirement Benefits Exceed Disability

Social Security deducts workers compensation benefits received from disability benefits. If you received a large settlement for an injury on the job, whether monthly or in a lump sum, the offset could reduce your SSDI to a lower amount. You have the right to switch to retirement benefits when reaching age 62. Workers compensation does not affect retirement benefits. Even a reduced retirement benefit may be much more than the offset disability check.

Windfall Elimination Provision

The Windfall Elimination Provision (WPO) reduces your Social Security retirement benefits and SSDI if you also receive a pension from employment that was not covered under Social Security, such as from another country or government agency. If the offset is severe, it may eliminate all or almost all retirement benefits, unless you wait until you are closer to full retirement age when the benefit will be greater. Because disability benefits are generally higher, your disability benefits may be the only one payable.

Social Security Disability Ceases at Full Retirement Age

Social Security benefits at full retirement age are equal to any SSDI payable. The Social Security Administration will not make a disability decision if your impairment began within five months of full retirement age (FRA), since the disability will not increase benefits. If you are receiving SSDI benefits, the SSA converts them automatically to retirement benefits at full retirement age. Your payments then are paid by the Retirement and Survivors Trust Fund rather than the Disability Trust Fund, and the SSA no longer needs to conduct continuing disability reviews.

About the Author

Jane Amar received a Bachelor of Arts in Spanish language and literature from the University of California in Riverside in 1970. After more than 37 years in government service in management and technical positions, she retired and began her writing career. Since 2007 she has written online content in English and Spanish for profit and nonprofit services and individual entrepreneurs.