Filing for Disability After Age 62 – How the Numbers Work

Much has been written about the question of whether to take early Social Security retirement at age 62 or to delay Social Security retirement to age 65 or longer. From a purely economic perspective, taking early retirement at age 62 will result in a reduction of your retirement benefits by around 30%.

SSA provides a calculator at https://www.ssa.gov/oact/quickcalc/early_late.html where you can plug in the numbers to see how early or delayed retirement can impact you.

But how does Social Security disability play into this calculation? If you are working at age 62 or beyond and have not claimed early Social Security retirement but you become disabled, does it make sense to pursue disability benefits in addition to (or instead of) filing for early retirement? What are the considerations?

What Happens When You File for Disability After Age 62?

There are a lot of moving parts in any decision you may make about when to claim your Social Security retirement benefit and you should not make that decision based on disability considerations. That being said, here is what I am telling potential clients close to or over age 62 who have not yet filed for early retirement.

If you file for disability at or slightly before age 62, your disability application will give you the option of also filing for early retirement benefits. By choosing this option, your monthly early retirement benefit will start at age 62. Given that disability cases can take two years or longer to be decided (and there is no guarantee that you will be approved), you will not be waiting for your disability decision with no money coming in.

If your disability decision is ultimately decided in your favor, your monthly benefit will be “bumped up” from the early retirement amount to a benefit payment which is roughly equal to your full retirement amount. In addition, you will be paid a lump sum equal to the difference between early retirement and full retirement for the months you have been waiting.

If the difference between early retirement and full retirement is $500 per month and your disability case takes 22 months from application to decision, you would get a lump sum of 500 x 22, which equals to $11,000. And your future retirement Social Security will be at the full retirement amount. You may also become eligible for Medicare earlier than age 65 (Medicare kicks in for SSDI recipients two years after eligibility for first SSDI payment).

If your SSDI case is denied, then you will continue to get your “discounted” early retirement benefit until you die.

In many situations, therefore, there is not much of a downside to filing for early retirement and Social Security disability at the same time. You can also factor in to the calculation that your odds of winning SSD increase after age 55 (see my website about the “grid rules”).

What is Your Date Last Insured and Why is it Important?

If you have made the difficult decision to file for disability because you no longer have the capacity to work even a simple, entry-level job, you need to start the process by filing a disability application with Social Security.

When you call the toll free number or apply online, SSA will ask you if you want to file for Title II disability (SSDI), Title XVI Supplemental Security Income, or both.

I generally advise my clients to file for both. If it turns out that you own assets, or have household income over the SSI limits, Social Security will determine that you are not eligible for SSI and you can proceed with your SSDI case.

Generally speaking, SSDI is a more robust program in that your monthly benefit will likely be higher, you won’t have to worry about assets you own or household income disqualifying you and you will eventually be eligible for Medicare (as opposed to Medicaid, which is associated with SSI).

In order to qualify for SSDI, however, you have to be insured for these benefits. SSDI is, in fact, an insurance program – the premiums you pay arise from the payroll taxes you have contributed over the years. Continue reading →