Most retirees rely on Social Security for their income, but if you were born in 1960 or later, you’ll need to work until age 67 to get full benefits. If you retire earlier, your payments will be smaller because of early retirement benefits (ERBs).
For folks dealing with health issues that make working hard, Social Security Disability Insurance (SSDI) offers full retirement benefits, even if you can’t work until age 67. But is applying for SSDI just to get higher benefits worth the extra effort and stress? Let’s understand this with an example.
Understanding Social Security Disability V/S Early Retirement With An Example
Imagine you’ve reached the age of 62. At this point, the Social Security Administration (SSA) calculates that you’re eligible for Social Security Disability Insurance (SSDI) benefits, which, on average, would be $1,483 per month in 2023. This is what you’d receive if you opted for SSDI.
However, if you retire early instead of going for SSDI, your monthly benefit would be smaller, precisely $1,038.10. By making this choice, you’d give up $5,338.80 in benefits each year. Throughout your retirement, this decision would add up to a substantial $64,065.60 less in total benefits than with SSDI.
What Are Early Retirement Benefits?
The age at which you can receive your full Social Security retirement benefits varies between 66 and 67, depending on your birth year. For those born in 1960 or later, the full retirement age is 67.
However, starting from age 62, you have the option to claim what’s known as early retirement benefits (ERBs). These benefits are lower than you would receive if you waited until your full retirement age. The reduction in benefits depends on your birth year, but if you were born in 1960 or later, choosing early retirement means you’d receive a benefit that’s 30% less than what you would get at your full retirement age.
What Is The Full Retirement Age For Social Security Benefits?
The full retirement age (FRA) for Social Security benefits varies depending on the year of your birth. Here are the full retirement ages for different birth years:
- For individuals born in 1937 or earlier, the FRA is 65.
- For those born between 1938 and 1942, the FRA gradually increases by a few months for each birth year.
- For individuals born between 1943 and 1954, the FRA is 66.
- For those born between 1955 and 1959, the FRA increases gradually again by a few months for each birth year.
- For individuals born in 1960 or later, the FRA is 67.
Your FRA is the age at which you can receive your full Social Security retirement benefits without any reduction. If you choose to claim benefits before your FRA (as early as age 62), your monthly payments will be reduced, and if you delay claiming benefits past your FRA (up to age 70), your payments will increase.
What is SSDI?
SSDI stands for Social Security Disability Insurance. It is a federal insurance program that provides financial assistance to individuals who have a disability and are unable to work due to that disability.
SSDI is administered by the Social Security Administration (SSA) and is designed to offer financial support to people who have paid into the Social Security system through payroll taxes and who meet specific medical and work-related requirements.
Learn more about the difference between SSDI and SSI.
Can I Check My SSDI Benefit Amount?
You can check your estimated SSDI benefit amount by creating a “my Social Security” account on the official Social Security Administration (SSA) website. Here’s how to do it:
- Visit the SSA Website: Go to the official Social Security website at “https://www.ssa.gov/.”
- Create an Account: On the SSA website’s homepage, click on the “My Social Security” tab. Then, click on “Create an Account.”
- Complete the Registration: Follow the on-screen instructions to create your account. You must provide personal information and answer security questions to verify your identity.
- Access Your Benefit Information: Log in once your account is set up. You can now access various services, including checking your estimated SSDI benefit amount. The website provides a detailed record of your earnings history and estimated benefits. Knowing about the Social Security Payment Schedule for 2023 may further give you an understanding of the time within which you will receive your disability benefits.
Early Retirement vs. SSDI
| Aspect | Early Retirement (ER) | SSDI (Social Security Disability Insurance) |
|---|---|---|
| Eligibility | Age-based (typically from 62-70) | Disability-based |
| Qualifying Criteria | Age and work history | Medical disability and work history |
| Monthly Benefit | Reduced compared to full retirement | Based on earnings and work history |
| Eligible Age | As early as 62 (reduced benefit) | No specific age requirement |
| Medical Evaluation | Not based on medical condition | Requires proof of disability |
| Waiting Period | None | Five-month waiting period after disability onset |
| Family Benefits | Spouses and dependent children may be eligible for benefits | Family members may receive auxiliary benefits |
| Continuation of Benefits | Benefits remain reduced for life | Continues as long as the disability persists |
| Medicare Eligibility | Not automatically eligible | Eligible after receiving SSDI for a specified period |
| Work Allowed | Limited work without penalty | Generally, limited work allowed with income limits |
| Impact on Benefit Amount | Early retirement results in reduced monthly benefits | SSDI benefit amount based on earnings history |
| Review and Reevaluation | No medical reviews | Periodic medical reviews to assess disability status |
How Much Do You Lose With ERBs vs. SSDI?
Imagine you were born in 1961, just turning 62. The Social Security Administration (SSA) calculates that your full retirement benefit would be a substantial $2,000 per month. However, your monthly income drops to just $1,400 if you choose early retirement benefits.
That’s a notable difference of $600 per month, which accumulates to a significant $7,200 each year. To put it in perspective, $7,200 could cover rent for four to six months, provide groceries for an entire year (with some extra), or take care of utility bills for nearly two years.
In this scenario, going for early retirement benefits instead of SSDI could mean missing out on a substantial $144,000 over 20 years, which could have been used to support various essential expenses and improve your financial security during retirement. Considering your long-term financial well-being, it’s a crucial decision that should be made carefully.
Should You Retire Early or Apply for Disability Benefits?
Deciding between early retirement and applying for disability benefits is a crucial choice that hinges on your health, financial readiness, and individual circumstances. If you’re in good health, have a substantial work history, and can manage with reduced benefits, early retirement at 62 might be an option.
On the other hand, if you have a significant disability that prevents you from working and you meet the criteria for Social Security Disability Insurance (SSDI), pursuing SSDI can provide crucial financial support. SSDI eligibility is tied to your work credits, so a solid work history is essential. Ultimately, the decision should be based on your specific health condition, financial situation, and long-term retirement goals.
How Can A Disability Lawyer Help You?
An experienced Social Security disability lawyer can provide valuable assistance in determining whether early retirement or SSDI is better for individuals facing health-related challenges. Some applicants also try to apply for the benefits without a lawyer. However, having guidance may avoid your denying of benefits.
They can evaluate your specific disability and its impact on your ability to work, helping you understand if you meet the criteria for SSDI benefits. Furthermore, they can guide you through the complex application process, ensure you meet deadlines, and maximize your chances of receiving the financial support you need.