What’s Better: Early Retirement or Disability Benefits?

by | Jun 5, 2024 | Social Security Disability |

Reaching the age of 62 while facing a disability can be challenging, especially when it comes to navigating the complexities of Social Security benefits. One common dilemma many individuals who suffer from an illness or injury encounter is whether to opt for early Social Security benefits or apply for Social Security disability insurance.

Understanding the implications of each option is crucial in making an informed decision that aligns with your financial needs and circumstances. Here’s what you need to know.

How can I obtain Social Security benefits early?

Social Security allows individuals to start receiving retirement benefits as early as age 62, even though their full retirement age may be later.

To qualify for early retirement benefits, you must have accumulated a sufficient number of work credits during your working years. Most individuals need 40 credits, which equates to about 10 years of work. These credits are earned based on your annual earnings subject to Social Security taxes.

Opting for early retirement means accepting reduced monthly benefits compared to what you would receive if you waited until your full retirement age. Your full retirement age is the age at which you become eligible to receive your full Social Security retirement benefit. It varies based on your year of birth. For those born between 1943 and 1954, the full retirement age is 66. It gradually increases for those born later, up to 67 for those born in 1960 or later.

The reduction is calculated based on the number of months you receive benefits before reaching your full retirement age. For example, if your full retirement age is 67 and you start benefits at 62, your benefits will be reduced by up to 30%.

If you choose early retirement and continue working, there’s an earnings limit you must be mindful of. If you earn more than a certain threshold, Social Security may withhold some of your benefits. However, once you reach your full retirement age, there’s no earnings limit, and your benefits are recalculated to give you credit for any withheld benefits due to excess earnings.

However, it’s essential to recognize that opting for early retirement results in a reduced benefit amount for the remainder of your life. On the other hand, if you qualify for Social Security disability, your benefit amount would be equivalent to your full Social Security retirement age benefit.

What’s the smart choice between early retirement benefits and disability benefits?

In most cases, if you meet the qualifications for Social Security disability benefits, it’s advisable to pursue that benefit rather than opting for early retirement. While the immediate financial need might prompt some to consider early retirement, applying for retroactive Social Security disability is an option. This means that if you’re deemed eligible for Social Security disability benefits after initiating early retirement, you could receive retroactive benefits to cover the difference between your early retirement payment and the disability benefit entitlement.

However, the timing of your disability determination is critical. If Social Security determines that your disability onset predates your early retirement, you may be entitled to retroactive payments. Conversely, if your disability is deemed to have occurred after you take early retirement, you won’t receive retroactive benefits. Instead, your Social Security payments will be adjusted to reflect your Social Security disability benefit amount.

Furthermore, it’s important to consider the long-term implications of opting for early retirement. Your full retirement benefits will be subject to a reduction based on the number of months you received early retirement benefits, known as the “reduction factor.” This reduction can significantly impact your financial stability in retirement.

Where to get legal advice about disability benefits

Seeking guidance from an experienced disability attorney can help you make an informed decision that’s best for your circumstances. The Social Security disability attorneys in Richmond, Virginia, at Hunter & Everage are ready to answer your questions about disability benefits. Reach out to us today.

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