As retirement nears, many wonder: Can you collect both retirement and disability benefits? 40% of adults 65+ face this question due to disabilities. This guide by Plan Benefits aims to clarify these concerns by exploring the intricacies of Social Security Disability Insurance (SSDI), Supplemental Security Income (SSI), and retirement benefits.
Understanding SSDI, SSI, and Retirement Benefits
Social Security offers various benefits depending on the individual’s retirement status and level of disability. Every program offers different forms of financial support and has distinct eligibility requirements. It is essential to comprehend these distinctions in order to make well-informed financial decisions in the future.
SSDI: Work Credits and Eligibility
SSDI is intended for people who have paid into the Social Security system via their labor but are unable to work because of a disability. To qualify for SSDI, you must have a verifiable disability and sufficient work credits. Work credits are accumulated based on your earnings from jobs covered by Social Security. In 2022, the average SSDI benefit was $1,358 per month, with a maximum of $3,345 for those with extensive work histories.
Your SSDI benefit depends on your average lifetime earnings before your disability begins. It’s essential to have earned these credits recently—generally within the last five years—before applying for SSDI. This ensures that the program supports individuals who have recently contributed to the system. Given that over 60% of initial SSDI applications are denied, often due to incomplete or incorrect information, it is highly recommended to work with a disability benefits lawyer. These professionals can help ensure your application is accurate and complete, increasing the likelihood of approval.
SSI: Income and Resources
Unlike SSDI, SSI does not require labor credits. It is a needs-based program created to help those who are 65 years of age or older, blind, or disabled but have poor incomes and few resources. The program offers financial assistance to help with necessities such as clothing, food, and housing.
The amount of SSI you can receive depends on your income and the value of your resources. In 2022, the maximum SSI benefit was $841 monthly for individuals and $1,261 for couples. Your total monthly income must be, at most, the Federal Benefit Rate (FBR), and the combined value of your resources must exceed $3,000 for couples and $2,000 for single individuals to qualify.
It’s crucial to note that both SSDI and SSI require that your disability meet Social Security’s strict criteria. This definition covers the inability to do substantial gainful activity (SGA) and a condition predicted to result in death or at least a year and a half. SGA means you are unable to earn a certain amount each month due to your disability, thereby limiting your ability to support yourself financially.
Navigating Retirement Benefits
Social Security retirement benefits are based on your earnings record and the age at which you choose to start receiving them. Understanding how these benefits are calculated and the implications of your retirement age can help you maximize your benefits.
Work Credits and Eligibility for Retirement Benefits
In order to be eligible for Social Security retirement benefits, you need to have accrued at least 40 labor credits over your lifetime. Depending on your annual earnings, you can typically earn up to four credits per year. As of 2022, you earn one credit for every $1,510 of earnings, so to earn the maximum of four credits in a year, you would need to earn at least $6,040.
Your average indexed monthly earnings (AIME) throughout the 35 highest-earning years will be the basis for calculating your retirement payout. Social Security may reduce your benefit amount if you have less than 35 years of earnings since they will utilize zeros in the computation.
Full Retirement Age and Benefit Amounts
The full retirement age (FRA) varies depending on your birth year. For those born between 1943 and 1954, the FRA is 66. For those born in 1955 and later, the FRA gradually increased, reaching 67 for those born in 1960 or later. The age at which you begin receiving benefits affects the amount you receive. If you start benefits at your FRA, you will receive 100% of your calculated benefit. Nevertheless, your payments will be lowered to reflect the longer time frame over which they would be paid if you start receiving benefits as early as age 62. Conversely, your benefits will increase if you receive benefits beyond your FRA until age 70.
For instance, your monthly benefit can be decreased by almost 30% if your FRA is 67 and you begin receiving benefits at 62. On the other hand, if you delay benefits until age 70, you could receive an increase of up to 8% per year beyond your FRA. This delayed retirement credit can significantly increase your monthly benefit amount, which can be beneficial if you anticipate a longer retirement.
The Incompatibility of SSDI and Retirement Benefits
One of the most common questions is whether you can collect SSDI and retirement benefits simultaneously. The short answer is no. You cannot collect SSDI and retirement benefits together. SSDI is intended to provide financial support to individuals who are disabled and unable to work, while retirement benefits are for those who have reached retirement age and are retiring from the workforce.
When you reach your full retirement age, any SSDI benefits you receive will automatically convert to retirement benefits. The amount you receive will generally not change; it will simply be classified differently. This conversion is seamless, and you do not need to take action for it to occur.
Early Retirement and Disability Benefits
If you decide to retire earlier than full retirement age, your retirement benefits will be permanently lower at age 62. The reduction is approximately 0.5% per month for each month before your FRA, up to 36 months, and then 0.4% for each additional month. This can result in a significant decrease in your monthly benefits if you opt for early retirement.
However, if you develop a disability after taking early retirement, you may be eligible to switch to SSDI benefits, provided you qualify under Social Security’s disability criteria. If your SSDI application is approved, you will not receive decreased retirement benefits; instead, you will receive SSDI benefits. The SSDI benefits will typically be higher than the early retirement benefits. However, once you reach your FRA, your SSDI benefits will automatically convert to regular retirement benefits, with no additional increase for delayed retirement credits.
In cases where the disability existed before the decision to take early retirement, and Social Security verifies this, you may be entitled to retroactive SSDI benefits. This means Social Security will pay you the difference between the reduced early retirement payments and the full SSDI benefits for up to 12 months before your application date. This situation can provide significant financial relief, as SSDI benefits are generally higher than reduced early retirement benefits.
Collecting SSI and Retirement Benefits
While you cannot collect SSDI and retirement benefits at the same time, it is possible to receive both under certain circumstances. SSI is available to individuals who are disabled, blind, or aged 65 and older and have low income and limited resources. If you qualify for SSI and receive retirement benefits, your retirement benefits are counted as income, which can affect the amount of SSI you receive.
It’s important to understand that SSI is designed to provide financial assistance to individuals with limited resources. Therefore, if your retirement benefits and other income exceed the income limits set by the SSI program, your SSI benefits will be reduced accordingly. In 2022, SSI’s Federal Benefit Rate (FBR) was $841 monthly for individuals and $1,261 for couples. Any income you receive, including retirement benefits, that exceeds these amounts will reduce your SSI payment dollar-for-dollar.
Federal Employee Disability Retirement (FERS Disability)
Federal employees covered under the Federal Employees Retirement System (FERS) have access to a specific disability retirement program known as FERS Disability Retirement. This program provides financial support to federal employees who cannot perform their duties due to a disability.
Eligibility for FERS Disability Retirement
To qualify for FERS Disability Retirement, federal employees must meet the following criteria:
- Service Requirement: You must have at least 18 months of creditable civilian service under FERS.
- Disability: Your disability must prevent you from performing your current job duties or any other vacant position at the same grade or pay level for which you are qualified.
- Medical Documentation: You need to provide comprehensive medical evidence that supports your disability claim, demonstrating the severity and impact of your condition on your ability to work.
- Application Timeline: You must apply while still employed or within one year of leaving federal service.
Coordinating FERS Disability with Social Security Benefits
FERS Disability Retirement benefits are typically offset by any SSDI payments you receive. Your FERS benefits may be reduced by the amount you receive from SSDI. It’s crucial to coordinate your applications for FERS Disability and SSDI to ensure you receive the maximum benefits available. Consulting with a disability attorney or financial advisor can help you navigate this process and understand how these benefits interact.
Retirement Options for Federal Employees with Disabilities
Federal employees with disabilities have several retirement options, including:
- FERS Disability Retirement: Provides financial support based on years of service and salary, designed for those unable to work due to a disability.
- Early Retirement: Available to those meeting specific age and service requirements, even if a disability is present.
- Deferred Retirement: This option allows employees to delay retirement, potentially increasing their benefits, especially if they return to work later.
- Combined Retirement and Disability: Depending on their specific circumstances, employees may be eligible for a combination of retirement and disability benefits.
Understanding these options and how they fit into your financial plan is crucial for ensuring a secure retirement.
Getting Assistance with Disability Benefits
Navigating the application procedure and determining your eligibility for disability benefits can be challenging. Social Security’s definition of disability is specific, and gathering the necessary medical, work, and financial documentation can be daunting. An online disability case evaluation can streamline this process, helping you determine eligibility and explore other options if you don’t qualify.
For those considering early retirement due to a disability, applying for SSDI first is often the best course of action. SSDI benefits are generally higher than early retirement benefits. SSDI recipients are automatically converted to retirement benefits at full retirement age without a reduction in benefit amount. Consulting with a disability attorney can also increase your chances of a successful application and guide you through the process.
Take the Next Step: Plan Your Benefits
Understanding the intersection of disability and retirement benefits is crucial for planning your financial future. Whether you’re considering early retirement due to a disability or need to navigate the complexities of SSDI, SSI, and FERS Disability Retirement, seeking professional guidance can make the process smoother and ensure you receive the benefits you deserve.
For personalized advice and assistance, consider consulting with a disability benefits attorney or financial advisor. They can help you understand your options, maximize benefits, and ensure a secure retirement plan.
You may ensure financial stability and peace of mind as you move into retirement by preparing ahead and knowing your options so that you can make educated decisions regarding your retirement and disability benefits. Take the time to review your situation, explore all available benefits, and consult with professionals to optimize your financial future.
