If you are disabled and collect Social Security disability benefits or intend to apply for them, have you given any thought to what may happen should your Social Security disability convert to retirement benefits? Whether or not your SSD converts to Social Security retirement depends on which of the two disability programs you applied to for benefits.
Benefits through Social Security Disability Insurance automatically convert to Social Security retirement at full retirement age, but disability benefits received through the Supplemental Security Income program do not. Your SSI benefits may not automatically convert, but if you are eligible for Social Security retirement benefits, you could be forced to apply for early retirement benefits.
Most articles about Social Security disability focus on how to apply and the criteria you need to meet to qualify. This article gives you information about the interaction between retirement and disability benefits along with tips to avoid a common mistake made by people applying for SSD make that ends up costing them money during their retirement.
Social Security Disability Programs
The Social Security Administration (SSA) programs exist to protect people against the financial hardships that accompany a loss of income due to being unable to work because of a disabling medical condition. Social Security Disability Insurance (SSDI) is for people who have earned a sufficient number of work credits at jobs or self-employment where they earned income that was subject to payment of Social Security payroll taxes.
Another option for someone who is disabled is the Supplemental Security Income (SSI) program. As with SSDI, a person who is blind or disabled and qualifies for benefits receives a monthly payment to help toward paying for basic needs, such as food, shelter, and clothing.
SSI is available regardless of whether or not a person has a work history, but there are strict limits on the amount of income and the value of financial resource limits available to a person applying for benefits. An advantage SSI offers over SSDI is its availability to children under 18 years of age who are blind or disabled. However, children and their parents or stepparents must meet the financial criteria to be eligible for benefits.
The Social Security retirement program that provides benefits to older people based on their work history may become a factor for people on SSI or SSDI either by conversion of benefits from disability to retirement or through a reduction of disability payments for people also receiving retirement benefits. A closer look at the two disability programs shows how a recipient may be affected upon reaching the age when they are eligible to receive either full or early retirement benefits.
Supplemental Security Income And Retirement
SSI is an income supplement program funded by the federal government through general tax revenues, which is why it can be made available to people who have not paid Social Security taxes on earnings from work or self-employment. It pays benefits to adults or children based on need.
The total value of assets a person owns may not exceed $2,000 for an individual and $3,000 for a couple, but some assets or resources do not count toward the resource total. For example, the value of a home or other type of dwelling and the land on which it is situated does not count as an available resource regardless of its value provided you occupy it as your principal residence.
SSI limits the amount of income a person may have each month and still qualify for benefits. For 2021, the monthly income limits are $794 for an individual and $1,191 for a couple. If you are 62 years of age and eligible to receive early retirement benefits through Social Security, you may continue to receive SSI.
As a matter of fact, you cannot refuse to apply or decide to wait until you are old enough to receive full retirement benefits. The retirement benefits do not result in an increase in your overall monthly income because payments from SSI are reduced by what you receive in retirement benefits.
Social Security Disability Insurance And Retirement
If you earned income subject to Social Security taxes through a job or self-employment, you may be eligible for SSDI benefits when a qualifying medical condition causes you to be disabled and unable to work. Whether or not your work history of sufficient duration to qualify for SSD under this program depends upon the work credits you earned.
You earn a work credit based on the amount you earn each year and may earn up to four credits a year. For 2021, you receive one work credit for each $1,470 in annual earnings.
Your monthly SSDI payment is funded by Social Security taxes and is based on your lifetime earnings. Your payments from disability convert to regular Social Security automatically when you reach the age when you are eligible for full retirement.
The age for full retirement depends on your year of birth. For example, someone born in 1955 became eligible to receive retirement benefits two months after reaching 66 years of age. Someone born in 1960 or later must wait until they are 67 years old.
Talk To A Disability Attorney Before Taking Early Retirement
If you are 62 years old and a medical condition prevents you from working, talk to a disability attorney at The Law Firm before taking early retirement benefits. Taking retirement benefits early reduces the amount you receive for the rest of your life.
An exception is when you apply for SSDI and Social Security determines that your disability began before you took early retirement benefits. In that case, there would not be a reduction to your SSDI. You would receive SSD retroactively to the date of the onset of the disability. The retirement benefits when the SSDI converts would be at the full amount you would have received had you waited.
However, if Social Security determines that your disability began after you accepted early retirement, your retirement benefits will be reduced for life. Get advice from a disability attorney before making a costly mistake.