Can I Apply for Disability and Early Retirement at the Same Time?

It is a common misconception many people have that an individual must choose between filing for either early retirement at age 62 or for disability benefits, when in reality a person can pursue both types of benefits at the same time.

When an individual chooses to start collecting early retirement, they are accepting a 25% reduction of their full retirement benefit. This reduction is permanent and cannot be reversed. The only way an individual can increase their early retirement benefit is by also receiving disability benefits.

If the retired individual is found disabled after the age of 62, they are paid the difference between the reduced retirement amount and the full Social Security benefit amount for each month the individual was already paid early retirement. They will then receive their full benefit amount for each month moving forward.

For example, Mary stopped working on January 1^st, 2010 because of her health condition. After her 62^nd birthday on June 1^st, 2011, Mary filed for early retirement. Because she already had stopped working due to her health condition, Mary also applied for disability, alleging that she could not work as of January 1^st, 2010.  In November, 2011, SSA found Mary disabled as she had alleged as of January 1^st, 2010. She is entitled to disability benefits as of July, 2010.

By this time, Mary had been collecting early retirement since June, 2011. SSA will retroactively pay Mary the difference between her early retirement benefit amount and her disability benefit amount for June, 2011 through November, 2011, then continue to pay her the full monthly benefit amount as long as she remains disabled through the age of 66.

However, there are some possible issues that could arise should an individual choose to file for early retirement and disability benefits at the same time. These possibilities must be kept in mind for anyone who is considering this route.

The first thing to remember is if you are denied disability, you will receive your retirement benefits at the reduced rate for the rest of your life. If you wish to avoid this scenario, it is more advisable to file for disability benefits between the ages of 62 and 65, rather than early retirement.

The second important point to remember is that it is possible for SSA to find you disabled on a date different than the one you claimed. In our example, Mary claimed she became unable to work on January 1^st, 2010. Instead, SSA finds her disabled as of December 1^st, 2011. Because Mary started collecting early retirement in June, 2011, this results in a 6 month reduction of benefits. She will not be paid any retroactive disability benefits for those months and, when she does turn 66, she will continue to suffer a 6 month penalty on her benefits as if she had retired at age 65 and 6 months.

SSA figures the penalty amount based on the year you are born. Please visit http://www.socialsecurity.gov/retire2/agereduction.htm for more information regarding reduction of benefits.

Because this interaction between the disability and retirement programs can be very confusing, it is a good idea to first talk to an attorney who can help you decide what is best for you. Knowing what your options are, as well as all possible outcomes, is vital in this very important decision. 

Written by Anna Westfall & edited by Paulette F. Balin

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