Originally Published August 17, 2012. Last Revised March 7, 2022
Taking early retirement at age 62 when you may qualify for Social Security disability is one of the costliest and most common mistakes that we help people avoid. Few people realize that you do not have to choose between filing for either early retirement or for disability. In reality, you can pursue both types of benefits.
First, it’s good to know how much you’d receive from Social Security for Disability, and for Early, Full, and Delayed Retirement. To see what your monthly benefits will be, create a My Social Security account at https://www.ssa.gov/myaccount/. Your benefit amount is based on how much you’ve paid in Social Security taxes.
When you agree to begin collecting Early Retirement at age 62 you are accepting a ~25% reduction of your full Social Security Retirement benefit. This reduction is permanent and cannot be reversed. The only way to get your full Social Security retirement benefit back is to be approved for Social Security Disability. The amount your retirement benefit is reduced by taking early retirement depends on the year you are born. You can read more about this reduction in benefits here.
If you take Early Retirement and you are later approved for Disability, Social Security will essentially reimburse the difference. Social Security will pay you back the difference between the reduced retirement amount and your full Social Security Disability benefit. Then you will receive your full benefit amount each month without any penalty.
Example Scenario of Early Retirement and SSDI
For example, Marcy stopped working on March 1, 2020 due to a heart condition. On June 1, 2020, Marcy turned 62 and filed for and began receiving Early Retirement benefits. On August 1, 2021, Marcy applied for Social Security disability benefits. She alleged she was unable to work since March 1, 2020 due to her heart condition. In November 2021, Social Security approved Marcy’s application for disability benefits. SSA also agreed her disability began March 1, 2020 as she had alleged.
There are 2 rules that will prevent Marcy from receiving back-pay for the entirety of her disability though. First, SSA will only issue payments for a maximum of 1 year prior to filing, regardless of when the disability began. In Marcy’s case, she didn’t file for Disability until August of 2021 meaning August of 2020 would be the maximum back pay. Second, there is a 5-month waiting period from when a disability begins to when Social Security will pay benefits. Since Marcy’s disability began March 1, 2020, she wouldn’t be eligible to receive benefits until August 2020.
Given these rules, Social Security will retroactively pay Marcy the difference between her reduced Early Retirement benefit and her full Disability benefit for August 2020 through November 2021. Marcy will continue to get her full monthly benefit amount as long as she remains disabled or until she reaches age 66. At 66, Marcy’s Social Security Disability benefit will automatically transition to her Social Security Retirement benefit because she reached full retirement age.
So, should I file for both Early Retirement and Disability?
Not everyone is as lucky as Marcy was in our example. Issues may arise if you choose to file for Early Retirement and Disability benefits at the same time. The first issue when applying for both – your Disability case could be denied. This will result in you still receiving your Early Retirement benefit, but at the reduced rate for the rest of your life. To avoid this scenario, file for Disability benefits between the ages of 62 and 65, and hold off on filing for Early Retirement.
A second potential issue – if Social Security approves your Disability benefits, but finds that your disability began on a later date than the one you claimed. In our earlier example, Marcy claimed she became unable to work on March 1, 2020. Instead, let’s say Social Security found that her disability began on September 1, 2020. Because Marcy collected early retirement for 6 months, this would result in a permanent 6-month reduction of Retirement Benefits. Marcy won’t receive any retroactive Disability Benefits for those months. When she reaches Full Retirement Age at 66, Marcy would continue to have a 6-month reduction of her benefits as if she had retired at age 65 and 6 months.
In short, the interplay between the Disability and Retirement programs is confusing. It is vital that you speak with an experienced disability lawyer who can advise you of your options, preferably before you file for either early retirement or disability.
You don’t have to decide this alone!