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SSD and Retirement

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A recent article published in the Motley Fool, an online personal finance magazine, discusses what happens when recipients of Social Security Disability (SSD) turn 66 (the current age for collecting full retirement benefits). Retirement benefits are often complicated for recipients of SSD, because they may not have worked long enough to either be eligible for standard SSD retirement payments at all or receive very much. This often worries many recipients of SSD who are afraid that the level of benefit will be reduced because they have no lengthy work history.

Fortunately for recipients of SSD benefits, the Social Security Administration (SSA) uses a different formula to calculate your retirement benefits than it does for people who have not received disability payments. For most retirees, Social Security calculates a 35-year work history. If you worked less than that, Social Security fills in a zero for periods when you didn't work, bringing down your average earnings. That's what scares SSD recipients.

Fortunately, the SSA uses a different approach when calculating retirement benefits for people receiving SSD. If you are receiving SSD when you turn 66, Social Security uses a formula that considers only your work history before you became disabled. Moreover, even if you are no longer receiving SSD benefits when seeking retirement benefits, you can ask Social Security to use what is called a "disability freeze" so that the years you were disabled and receiving SSD benefits are not counted as zeros and thus do not reduce your average lifetime earnings. This has the effect of removing the penalty for returning to work.

There are variations that apply depending on the specific circumstances. For example, if you become disabled, apply for early retirement and then have your SSD application approved, you will get both retirement benefits and disability benefits that bring you to the full amount you would have received if you had waited until age 66 to retire. However, if you collected early retirement benefits and then became disabled, you will get disability benefits based on your work record, but at age 66 your retirement benefits will go back to the reduced amount based on your taking them early.

The bottom line: Most people who receive SSD will not see their benefits decrease significantly once they reach full retirement age.

This information about Social Security Disability and retirement benefits was brought to you by Binder & Binder®, America's most successful Social Security Disability advocates. If you are having problems with your application for SSD benefits, give us a call from anywhere in the United States and learn how we can help.

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