As you approach retirement age, you might find yourself evaluating your options for financial support during your golden years. For individuals with disabilities, the decision can become even more complex. Many people wonder whether they will receive a higher amount for SSDI vs retirement. Understanding the differences is crucial to making an informed choice. Let us help you navigate the nuances of each option to determine which path offers the greatest financial advantage for your specific situation.

Understanding SSDI and Retirement Benefits

Social Security Disability Insurance (SSDI)

SSDI is a federal program that provides financial assistance to individuals who are unable to work due to a disability. To qualify for SSDI, you must meet the following criteria:

  • Work Credits: You must have earned enough work credits by paying Social Security taxes through your employment. Generally, you need 40 credits, 20 of which were earned in the last 10 years ending with the year you become disabled. Younger individuals may qualify with fewer credits.
  • Disability Criteria: Your medical condition must meet the SSA’s definition of disability, which is a severe impairment that prevents you from performing substantial gainful activity (SGA) and is expected to last at least one year or result in death.

Social Security Retirement Benefits

Social Security retirement benefits are available to individuals who have reached the minimum retirement age, which is 62. However, claiming benefits before reaching full retirement age (FRA), which ranges from 66 to 67 depending on your birth year, will result in a permanently reduced monthly benefit. Here are the key points:

  • Early Retirement: You can start receiving benefits as early as age 62, but your benefits will be reduced by up to 30%.
  • Full Retirement Age (FRA): If you wait until your FRA to claim benefits, you will receive 100% of your entitled benefit.
  • Delayed Retirement: Delaying benefits past your FRA increases your monthly benefit amount by up to 8% per year for each year you delay, up to age 70.

Financial Comparison: SSDI vs Retirement

To determine whether SSDI or retirement benefits will provide you with more financial support, consider the following factors:

Monthly Benefit Amounts

  • SSDI Benefits: The amount you receive from SSDI is based on your average lifetime earnings before your disability began. This amount is generally similar to what you would receive at your FRA.
  • Retirement Benefits: If you claim retirement benefits at age 62, you will receive a reduced amount for the rest of your life. This reduction can significantly impact your overall financial stability.

Work History and Earnings

  • SSDI: Because SSDI benefits are based on your earnings record, individuals with a consistent work history and higher earnings will receive higher SSDI payments.
  • Retirement: Similarly, your retirement benefit amount is based on your highest 35 years of earnings. However, taking benefits early reduces this amount.

Health and Life Expectancy

  • SSDI: For individuals with severe disabilities that limit life expectancy, SSDI provides immediate financial support and may be the more advantageous option.
  • Retirement: If you are in good health and expect to live a long life, delaying retirement benefits might make more sense. 

Case Scenarios: SSDI vs Retirement

When deciding between SSDI and retirement benefits, it is essential to consider various scenarios based on your age, health, and financial needs. The following examples illustrate two common situations individuals may face when choosing between early retirement and SSDI benefits.

Scenario 1: Early Retirement vs. SSDI Approval

If you are 62 and unable to work due to a disability, you might consider applying for early retirement benefits. However, your SSDI benefits will replace your reduced retirement benefits, and you will receive the full SSDI amount. This approach ensures you receive the maximum benefit you are entitled to based on your earnings record.

Scenario 2: Waiting for Full Retirement Age

If you are close to your FRA and can manage without early retirement benefits, waiting until you reach FRA will provide you with a higher monthly benefit. If you qualify for SSDI, you can transition to retirement benefits at your FRA without any reduction.

Maximizing Your Benefits

To maximize your Social Security benefits, consider the following strategies:

  • Evaluate Your Health and Work Capacity: If you are unable to work due to a disability, apply for SSDI as soon as possible to secure higher benefits.
  • Understand Your FRA: Know your full retirement age and the impact of claiming benefits early or delaying them.
  • Consult with a Financial Advisor: A financial advisor can help you evaluate your specific situation and plan for the most advantageous benefit strategy.
  • Seek Legal Assistance: Consulting with a disability attorney can help you navigate the SSDI application process and ensure you receive the benefits you are entitled to.

Get Assistance with Your SSDI Application

Deciding between SSDI and retirement benefits is a significant financial decision that requires careful consideration of your health, work history, and financial needs. By understanding the differences between SSDI and retirement benefits, you can make an informed choice that maximizes your financial security.

If you have further questions or need assistance with your SSDI application, The Law Offices of Karen Kraus Bill are here to help. Contact us today for a free consultation and take the first step towards securing your financial future.