Using Disability to Avoid Early Retirement and Save Money

Have health problems forced you to retire early? You might have other options.

old man face shadow2Are you in your 60s and unable to continue working on a full-time basis due to health problems? If so, you need to carefully consider your Social Security Disability benefit options before filing for Social Security Retirement benefits. A failure to properly assess your options can cost you hundreds of dollars per month in Social Security benefits. Over the course of your golden years, the failure to properly assess your options can cost you tens of thousands of dollars. In fact, we have seen individuals cost themselves over $100,000.00 by failing to consider disability over early retirement.

Social Security’s full-benefit retirement age is gradually increasing because of legislation passed by Congress in 1983. Historically, the full benefit age was 65 and early retirement benefits were first available at age 62, with a permanent reduction to 80 percent of the full benefit amount. Now, the full benefit age is 66 for people born in 1943–1954, which will gradually rise to 67 for those born in 1960 or later. Early retirement benefits will continue to be available at age 62, but they will be reduced even more than they already are. When the full-benefit age reaches 67, benefits taken at age 62 will be reduced to 70 percent of the full benefit, and benefits first taken at age 65 will be reduced to 86.7 percent of the full benefit.

If you can’t work because of health problems, consider applying for Social Security disability benefits before taking a reduced early retirement. The disability benefit amount is the same as a full, unreduced retirement benefit. If you’re getting Social Security disability benefits when you reach full retirement age, Social Security will convert disability benefits to retirement benefits.

If you have already elected to take a reduced early retirement instead of applying for disability benefits it is possible—in some instances—to revert those benefit payments from retirement to disability payments to avoid any reduction in your future monthly retirement benefits.

If you can prove your disability began before you began receiving reduced early retirement, you can get a “disability freeze.” A “disability freeze” automatically disregards any low-earning or zero-earning years on your record for the period that your disability prevented you from working (or reduced your earning capacity to below a certain level). This is important because both Social Security disability and Social Security retirement benefits are calculated based upon your earnings: years with no or low earnings on your record would otherwise reduce your benefits without the “disability freeze.” However, you need to apply for disability before you are one year past your full retirement age.

If Social Security decides that you did not become disabled until after you began to receive reduced early retirement, you won’t receive any retroactive payments; instead, your Social Security payments will simply convert to your Social Security disability benefit amount. Once you reach retirement age, your full retirement benefits will be reduced based on how many months you received early retirement.

There are many pitfalls and traps associated with navigating the Social Security process on your own. Additionally, an individual’s work record and personal circumstances impacts the decision-making process; there is no one-size-fits-all approach.

If health problems have forced you to consider early retirement, you should promptly contact an experienced Social Security disability lawyer to discuss your options. To learn more about disability, please see our page about disability benefits and schedule a free appointment with one of our disability attorneys today!

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