Disability Benefits vs Retirement: Which Is Right for You?

Knowing When to Retire or Apply for Social Security Disability Benefits

If your health is making it difficult—or impossible—to continue working, you may be wondering whether you should apply for Social Security Disability benefits (SSDI) or start collecting Social Security retirement benefits. This is a common question, especially for people in their 50s or early 60s who are struggling to stay employed but are not yet at full retirement age.

Understanding the difference between retirement, early retirement, and disability benefits can help you make a more informed decision.

Understanding Your Social Security Benefit Options

There are three types of Social Security benefits that may be relevant:

• Retirement benefits: These are monthly benefits you can receive at your Full Retirement Age (FRA). Your FRA depends on your year of birth. For anyone born in 1960 or later, it is age 67.

• Early retirement benefits: You can begin receiving retirement benefits as early as age 62, but your monthly payment will be permanently reduced. For someone whose full retirement age is 67, claiming at 62 can reduce the benefit by as much as 30%.

• Disability benefits: SSDI provides monthly benefits to people who meet Social Security’s work requirements and have a medical condition that prevents them from working and is expected to last at least 12 months or result in death.

For someone who is approaching retirement age and can no longer work because of a medical condition, the key question may be whether to take early retirement, apply for disability, or consider both.

Why Apply for Disability Instead of Taking Early Retirement?

The biggest reason to consider disability instead of early retirement is simple: you can no longer work because of a serious medical condition.

If your condition prevents you from earning a living and is expected to last at least 12 months (or result in death), disability benefits may be an option.

This can be especially important if you are under full retirement age. Taking early retirement permanently reduces your monthly retirement benefit. SSDI generally does not include that early-retirement reduction.

For example, if your full retirement benefit would be $2,000 per month at age 67, starting retirement at 62 could reduce that amount by up to 30%, depending on your circumstances. If you instead qualify for SSDI, your disability benefit is generally based on your full benefit amount rather than the reduced early-retirement amount.

Who Qualifies for Disability vs. Retirement?

To qualify for Social Security Disability Insurance (SSDI), you generally must:

• Have a medical condition that significantly limits your ability to work

• Expect the condition to last at least 12 months or be terminal

• Have enough work credits to be insured for disability benefits

• Be unable to perform Substantial Gainful Activity (SGA) because of your condition

To qualify for Social Security retirement benefits, you generally need:

• Enough work credits from your employment history

• To be at least age 62 for early retirement, or to have reached your full retirement age for unreduced retirement benefits

The requirements are different because retirement benefits are based primarily on your age and work history, while disability benefits require you to meet Social Security’s definition of disability.

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

Yes. In some situations, a person can apply for both SSDI and early retirement benefits.

This can be useful for someone who needs income while waiting for a disability decision. However, receiving early retirement benefits while a disability claim is pending can affect how benefits are paid if the disability claim is later approved.

If Social Security finds that you were disabled during months when you were already receiving early retirement benefits, you generally would not receive two full benefits for the same month. Instead, Social Security may pay the difference between the early retirement amount and the disability amount for overlapping months, along with any other benefits owed for the approved disability period.

In some cases, disability benefits can also be paid retroactively for a period before the disability claim was approved, depending on when the disability began and when the application was filed.

If you are considering both options, it is important to understand how filing for early retirement could affect your particular situation.

What If You Wait Until Full Retirement Age?

If you can afford to wait and are not claiming early retirement, reaching full retirement age generally means you can receive your full retirement benefit without the early-retirement reduction.

But there is another important consideration for someone who becomes unable to work because of a disability.

When you qualify for SSDI, Social Security generally places a disability freeze on your earnings record. This helps prevent years in which you are unable to work and have little or no earnings from lowering the earnings record used to calculate your future retirement benefit.

In other words, if you stop working because of a disability, those years of little or no income generally won’t be counted against you in the same way they could without a disability freeze.

Can You Receive Both Disability and Retirement Benefits?

You generally cannot receive full SSDI and full retirement benefits as two separate payments for the same period.

If you receive SSDI, your disability benefits generally continue until you reach full retirement age, at which point they automatically convert to retirement benefits. The monthly amount generally remains the same.

Someone who starts early retirement while waiting for a disability decision may have a different situation because the early retirement payments and any later disability benefits can overlap.

Which One Is Right for Me?

The answer depends on why you are considering Social Security benefits and whether you are still able to work.

If you simply want to stop working because you have reached an age when you are ready to retire, early retirement or waiting until full retirement age may make sense.

But if you are struggling to work because of a serious medical condition, disability may be worth exploring before taking early retirement—especially if you are under full retirement age and taking early retirement would permanently reduce your monthly benefit.

Many people wait too long to apply because they assume they should simply “tough it out” until retirement. But if your health is declining and work is becoming unsustainable, understanding your options sooner can make a significant difference.

You can also learn more about signs it may be time to apply for disability benefits.

If you’re unsure which path makes the most sense, a disability advocate can help you understand your options and whether applying for disability benefits may be appropriate for your situation.

Start with our free, 2-minute questionnaire to learn more about your options.