Disability vs. Social Security Benefits at Retirement

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To the Social Security Administration, you can be retired or you can be disabled, but you can't be both. If you have been collecting Social Security Disability Insurance benefits, they automatically switch to retirement benefits when you reach full retirement age: 66 years old, as of 2012. The dollar amount you receive remains about the same, because it's based on what you paid into the system while you were working.

Disability and Early Retirement

When you reach age 62, you may elect to change from disability benefits to early retirement benefits, but with a heavy penalty. The Social Security Administration assumes you will live to a certain age. If you start your retirement benefits early, the total lifetime amount you will receive remains constant, but since it must be spread over 48 more months, the amount you receive each month will be reduced by as much as 25 percent. If you become disabled between age 62 and 66, you can collect early retirement benefits and apply for SSDI at the same time. If you are granted SSDI, your benefits will increase, retroactively. If you are denied SSDI, your retirement benefits will remain permanently reduced.

Early Retirement Work Rules

If you're working and earning over $1,010 a month in 2012, you may want to switch from SSDI to early retirement benefits. After certain allowed periods of time, if you earn over $1,010 per month, you will lose your disability benefits. If you change over to early retirement, you can earn $14,160 (2012) per year and not lose any benefit. Earnings over this amount will reduce your benefits by $1 for every $2 you earn.

Full Retirement Work Rules

Once you reach full retirement age, you can earn any amount and not affect your benefits. Social Security defines disability as the inability to work, so if you earn too much while collecting SSDI, you'll be considered no longer disabled. Once your benefits switch to full retirement benefits, your disability becomes irrelevant.

Other Considerations

If you're disabled and collecting worker's compensation or other disability benefits, they may have a bearing on the amount of disability benefits to which you're entitled. Some benefits reduce disability benefits, but don't affect retirement benefits. Check with your financial advisor before making any decision to switch benefits before you reach full retirement age.