When you approach age 65 or your full retirement age (FRA), it’s natural to have questions about your disability benefits and how they might change. In most situations, your disability benefits will remain the same. What does happen is that your monthly payment will transition from the Social Security Disability program to the Social Security Retirement program. It’s important to note that 65 is no longer the universal retirement age. The exact age varies based on when you were born, and this is called your Full Retirement Age (FRA).
At National Disability Experts, we believe it’s essential for all our clients, whether in Illinois or anywhere across the country, to understand the benefits available to them if they experience a disabling injury or illness. The amount of your monthly benefits, eligibility criteria, and access to health insurance coverage are all critical considerations when dealing with a disability. Our team is dedicated to helping you secure the highest possible disability benefits for which you qualify.
This article will explain why your disability benefits won’t change when you reach your full retirement age (FRA). We also explain how to determine your FRA, and under what circumstances your disability payments might change if you filed for early retirement. If you have further questions or need more details, you can reach out to us at National Disability Experts anytime for individual help.
Why Your Disability Benefits Remain the Same at Retirement
Your Social Security Disability payment is calculated using a specific formula developed by the Social Security Administration (SSA), which is based on your highest-earning 35 years. The SSA adjusts those high-earning years for cost-of-living increases and averages them to calculate your base figure, known as your Average Indexed Monthly Earnings (AIME). This figure is used to determine both your SSD benefits and your Social Security Retirement benefits.
The Formula for SSD and Retirement Benefits
Your monthly SSD and Social Security Retirement benefits are determined by applying your Average Indexed Monthly Earnings (AIME) to a standard formula:
- 90% of the first $1,174 of your AIME, plus
- 32% of the AIME between $1,174 and $7,078 plus
- 15% of the AIME above $7,078
For example, if someone has an AIME of $4,839 (which correlates to an average annual income of approximately $58,079), their benefit would be calculated as follows:
- 90% of the first $1,174 = $1,056.60
- 32% of the amount between $1,174 and $7,078. ($4,839 – $1,174 = $3,665) so 32% = $1,172.80
- 15% of any amount above $7,078 = $0
$1,056.60 + $1,172.80 + 0 = $2,229.40. Since the resulting figure is already divisible by 10, no rounding down is necessary. This figure, called your Primary Insurance Amount (PIA), represents your monthly benefit, which may increase over time due to cost-of-living adjustments.
This same formula applies whether you’re receiving SSD benefits or Social Security Retirement benefits once you reach your full retirement age.
Understanding Full Retirement Age (FRA)
For many years, the standard retirement age was 65. However, in 1983, Congress adjusted the retirement age in stages, raising it to 67 for those born in or after 1960. For those born between 1943 and 1954, the full retirement age was set at 66. If you were born in 1955 or later, your FRA increases incrementally based on your birth year. For example, individuals born in 1955 reach full retirement age at 66 and 2 months, those born in 1956 at 66 and 4 months, and so on. For people turning 65 in 2024, full retirement age will be 66 years and 10 months.
Early Retirement’s Impact on Benefits
If you decide to take early retirement before your FRA, your retirement benefit will be permanently reduced. However, if you are receiving SSD benefits, your monthly disability benefit will continue at the full amount of your retirement benefit until you reach your full retirement age. That means, if you are already receiving SSD payments before your FRA, you should not file for Social Security Retirement benefits until you reach your full retirement age.
For instance, if you’re 61 years old and receiving SSD benefits, and you opt to take early retirement at 62, your early retirement benefit would be about 30% less than your current SSD payment. It would also be 30% lower than what your retirement benefit would be if you waited until you reached your FRA.
What Happens If You Claimed Early Retirement and Then Became Disabled?
If you claimed early retirement at age 62 and later become disabled before you reach your FRA, you can still apply for disability benefits. Once approved, your monthly SSD benefit will be equal to your full retirement benefit. This amount will continue until you reach your FRA, at which point the benefit will revert to the 30% reduced amount due to your earlier claim for retirement benefits.
If you have questions or would like to learn more about how your specific situation might impact your benefits, contact National Disability Experts. We are here to guide you through the complexities of Social Security Disability and ensure you receive the benefits you deserve.