“If you’re disabled before retirement age, should you retire early or apply for Social Security disability (SSDI)? – Debra May

By Debra May

Three of four Americans over age 65 have life-impacting medical conditions, including high blood pressure, obesity, arthritis, and other chronic afflictions. These conditions often lead to disabilities.

From a legal perspective, disability is an inability to perform activities of daily living because of medically determined impairments. To be classified as disabilities, impairments must usually last for at least twelve months or be diagnosed as being fatal.

If you experience a disability shortly before your scheduled retirement, you may need to stop working before reaching your “full retirement age,” or FRA.

Currently, Americans may apply for Social Security and other programs as soon as they reach the age of 62. Unfortunately, you will only receive around 70% of your monthly benefit amount unless you wait until full retirement age.

Many disabled seniors retire early, unaware they have other options. One of these options, Social Security, offers a type of disability insurance (SSDI) that could make more financial sense for disabled retirees.

If you’re 62 when you become disabled, Social Security Disability SSDI payouts could be higher than those of early retirement. While it’s almost always a time-consuming, frustrating process to qualify for SSDI, selecting this option might mean significantly greater benefits.

If you manage to qualify for SSDI, you’ll get 100% of the monthly benefit, even when you’ve switched to regular Social Security payments at full retirement age.

Why don’t more people choose SSDI?

Americans avoid applying for SSDI because the process is well-known as a time-consuming and tedious process. SSDI, like many government programs, is replete with often arcane rules and regulations, along with deadlines and other hoops. Those attempting to access SSDI must be ready and willing to take on numerous bureaucratic hurdles and hassles. It’s not unusual for Social Security Disability Insurance to reject even the most meticulous, well-documented applications.

Opening an SSDI claim requires patience and diligence. You’ll need to prove your diagnosis and its severity. If you can do so and have the necessary documentation for any limitations caused by your disability, you can probably get SSDI benefits. Many disabled people discover that hiring a disability advocate makes the filing process more efficient and tolerable.

Once you are disabled, talk to your financial advisor for help finding an SSDI expert to outline your strategy. Your advisor will review your current financial situation and assess the impact of your disability on your wealth. Be sure you understand both the early retirement and SSDI options and the implications of both choices. It’s also possible to apply for BOTH SSDI and early retirement. Your retirement and income specialist may recommend this option because SSDI claims can take months, or even years, to complete.

Conclusion: Being disabled shortly before or during retirement is an unfortunate but common occurrence. Still, disability before reaching full retirement age doesn’t always have to be devastating. If you are still healthy, you should have a plan to deal with a potential disability. f Creating a disability plan now can help you deal with an unexpected situation that could cost you money.