If you become disabled in your late 50s or early 60s, you may be wondering: Should I collect early retirement benefits, or should I apply for Social Security disability benefits? What’s the difference between the two?
What Is Early Retirement?
“Normal retirement age” used to be 65 years. However, in 1983, Congress passed the Social Security Amendments to gradually raise the retirement age for people born in 1938 or later. Better health and increased life expectancy for seniors made it necessary to increase the normal retirement age.
You can view the Social Security Administration’s retirement age calculator here. Currently, those born before 1938 can retire at 65, those born between 1943-1954 can retire at 66, and those born after 1960 can retire at age 67. People born in between those periods of time (e.g. 1956) do not retire at a round number of years but instead have had their retirement ages increased incrementally by a number of months (e.g. a person born in 1956 can retire at 66 and 4 months).
However, you can retire before you reach your “normal retirement age.” No matter when you were born, the earliest you can start receiving your Social Security retirement benefits is 62. Early retirement is when you receive your retirement benefits before your “normal retirement age.”
If you do elect to receive early retirement benefits, you will only receive about 75 percent of what you would have received had you waited until your “normal retirement age.”
Work Credits: The Measure for Retirement and Social Security Disability
In order to qualify for Social Security disability or retirement benefits, you must have a certain number of work credits. You earn work credits by working and paying your Social Security taxes throughout your life. Typically, full-time workers earn 4 work credits a year.
If you were born in 1929 or later, you need 40 work credits to qualify for retirement. That means you need at least 10 years of work history and paying Social Security taxes to qualify. To qualify for disability, the number of credits you need depends on the age you became disabled and can range from 20 to 40 credits if you are aged 31-62.
In this way, Social Security disability acts sort of like retirement benefits for people too young to receive retirement benefits but who have been, in a sense, forced to “retire” due to their disability.
Can I Receive Early Retirement and Disability Benefits at the Same Time?
Typically, you cannot receive both early retirement and disability benefits.
But what if you become disabled, begin receiving early retirement, and then decide to apply for disability benefits? If you are later approved for disability and it is determined that your disability began before you started receiving early retirement, Social Security will retroactively make up the difference between your disability benefit and your early retirement benefit.
For example: Suppose you become disabled and have to quit your job in January 2014. You begin receiving early retirement benefits of $750 a month, but then you decide to apply for disability. In January 2016, you are approved for disability, and your benefit is $1000 a month. Social Security determines that you were disabled as of January 2014. Therefore, they will reimburse you the $250 a month extra you should have received through all of 2014 and 2015 for a total of $6000 in what is referred to as back pay.
Remember that there is no guarantee you will be approved for disability later on if you decide to start taking early retirement now. If you begin taking early retirement, apply for disability, and are denied, you will not receive any reimbursement, and you will be stuck taking retirement at the early retirement rate even after you pass your “normal retirement age.”
For example: Let’s say you turn 62 and begin receiving $750 a month. If you had waited until you turned 67, you would have received $1000 a month. Five years later, when you turn 67, you won’t receive that $1000/month rate since you took early retirement. You’ll only receive a percentage of that full rate.
Help from an Indiana Social Security Disability Attorney
If you’re debating whether or not you should take early retirement benefits or file for Social Security disability benefits, it’s a good idea to talk with an Indiana Social Security disability attorney. He or she can listen to your specific situation and outline the options you have. Call Hensley Legal Group today or contact us online to schedule a free consultation and get answers to your Social Security benefits questions.