In almost everyone’s case, your disability benefits should not change when you turn 65 or reach your full retirement age. What will happen is that the monthly benefit payment will switch from the Social Security Disability program to the Social Security Retirement program. But 65 is not the retirement age for everyone anymore. The key age is called the Full Retirement Age (FRA) which is different for people born in different years.
This blog post will explain why your disability benefits won’t change when you reach your full retirement age (FRA), how to figure out what your FRA is, and in what circumstances some people’s disability payments will change when they reach FRA if they filed for early retirement. If you have other questions or need more information after reading this post, contact us anytime at Liner Legal Disability Lawyers.
Why Your Social Security Disability Does Not Change When You Reach Retirement
The amount of your monthly Social Security Disability (SSD) benefits is based on a formula applied to an average of your highest 35 years of annual earnings. The Social Security Administration takes those highest annual income years, indexes them for cost-of-living adjustments, and then adds them together before dividing the sum by 35. That results in your average indexed annual income. To figure out what your monthly average earnings were, that figure is then divided by 12. This provides the base figure called your Average Indexed Monthly Earnings (AIME).
This is the SAME process Social Security uses to figure out your Social Security Retirement benefit amount when you reach full retirement age (FRA).
Formula Used for Both SSD Benefit and Social Security Retirement Benefit
Your monthly SSD benefit and your monthly Soc. Sec. Retirement benefits are determined by putting your Average Indexed Monthly Earnings through this formula:
- Add 90% of the first $1,024 of AIME, plus
- 32% of the AIME between $1,024 and $6,172, plus
- 15% of the AIME above $6,172, then
- round down to the nearest $0.10 if not already a multiple of .10.
Resulting Figure Equals Your Primary Insurance Amount (PIA).
For example, let’s assume a person’s AIME is $4,839.92. That would correlate to an average annual income of approximately $58,079. [Avg. of avg. income between 1990 – 2020)
- Add 90% of first $1,024 of $58,079 = $921.60, plus
- 32% of amount between $1,024 and $6,172 ($4,839.92) = $1,221.09
- 15% of any amount above $6,172 = $0, $921.60 + $1,221.09 + $0 = $2,142.69
- rounded down to next $0.10 = $2,142.60
This example produces a Primary Insurance Amount (PIA) for this SSD or Soc. Sec. Retirement claimant of $2,142.60. This is the monthly benefit, but the annual cost of living adjustments usually increase the benefit.
What’s Full Retirement Age?
The standard age of retirement and eligibility for Social Security Retirement benefits was 65 for many years. Then in 1983, Congress enacted a plan to gradually raise the age at which people would become eligible for their full retirement benefit from 65 to 67. Rather than impose the change in one year, the law increased the “Full Retirement Age” (FRA) for those born between 1943 – 1954 by one year, making their retirement age 66.
For those born in 1955, their FRA was raised to 66 and 2 months; those born in 1956 had their FRA set at 66 and 4 months. Those born in each successive birth year reach their FRA 2 months later than those born the previous year until 1960 when the FRA for those born that year and later is 67.
Early Retirement Does Not Affect SSD Benefit But Reduces Retirement Benefits Permanently
Claiming retirement before you reach your full retirement age will reduce your retirement benefit amount permanently. But if you are receiving SSD benefits, your SSD benefits will be paid in the full amount of your full retirement benefit.
For example, if you are 61 years old and you are receiving SSD benefits, you may wonder what will happen if you claim Social Security Retirement benefits when you reach age 62. The early retirement benefit amount would be roughly 30% less than your current SSD benefit payment and 30% less than what your retirement benefit would be if you waited to claim it when you reached your FRA.
What happens if you already claimed early retirement and then became disabled?
If you claimed early retirement at age 62 and then became disabled, you are eligible to file a disability claim and, if approved, your monthly SSD benefit would be equal to your full retirement age retirement benefits. Those benefits would continue until you reached your FRA, at which time they would revert to the 30% lower benefit level because you claimed retirement earlier than scheduled.
Don’t Keep Wondering
We know that all the formulas, equations, and rules about how much you could receive at any age can be very confusing. We practice nothing but disability law. Few other law practices devote themselves entirely to helping people with disabilities. It’s our mission to help you get the benefits you deserve.