Social Security Disability Insurance (SSDI) and retirement benefits are two separate programs administered by the Social Security Administration (SSA). While there is some overlap between the two, they have distinct eligibility requirements and benefit amounts.
What is SSDI?
SSDI provides income support to people who can no longer work due to a disability. To qualify for SSDI, you must:
- Have worked long enough and recently enough to be insured by Social Security. You must have earned at least 20 work credits in the last 10 years before becoming disabled.
- Have a medical condition that meets Social Security’s definition of disability. Your condition must prevent you from working and be expected to last at least one year or result in death.
If approved for SSDI, your benefit amount will be based on your lifetime earnings. The SSA calculates your basic benefit, or “primary insurance amount,” using a formula that accounts for your 35 highest-earning years. In 2023, the average SSDI benefit is $1,358 per month.
What is full retirement age?
Full retirement age refers to when you can collect your full Social Security retirement benefit based on your earnings history. For people born in 1960 or later, full retirement age is 67. You can start receiving retirement benefits as early as age 62, but they will be permanently reduced. If you delay benefits past full retirement age, you can earn delayed retirement credits that increase your benefit by 8% per year up to age 70.
Your full monthly retirement benefit is also based on your average indexed monthly earnings over your 35 highest-earning years. In 2023, the average Social Security retirement benefit is $1,827 at full retirement age.
Key Differences Between SSDI and Retirement Benefits
While SSDI and retirement benefits are calculated similarly, there are some important differences:
- Eligibility: For SSDI, you must be unable to work due to a medical condition. For retirement benefits, you simply need to reach the eligible age.
- Work status: SSDI recipients generally cannot have substantial gainful activity. Retirement beneficiaries can work while collecting benefits.
- Average benefit amount: The average SSDI benefit is lower than the average retirement benefit. In 2023, it’s $1,358 vs $1,827 per month.
- Cost-of-living adjustments: SSDI and retirement benefits get annual COLAs to keep pace with inflation. But the COLA formula is slightly more generous for retirement.
- Family benefits: SSDI provides dependent benefits to qualifying spouses and children. There are no dependent benefits with retirement.
Can You Receive SSDI and Retirement Benefits?
It is possible to receive both SSDI and retirement benefits, but your benefits will be coordinated. Here’s how it works:
- If you receive SSDI and reach full retirement age, your disability benefit automatically converts to a retirement benefit. There is no change in the benefit amount.
- If you receive SSDI and claim retirement benefits early, you will get your disability benefit plus a reduced retirement benefit.
- You cannot receive SSDI and spousal benefits at the same time. If eligible for both, Social Security pays you the higher amount.
So in summary, your total benefit amount does not increase by claiming both SSDI and retirement. You simply get the higher of the two benefits.
Strategies to Maximize SSDI and Retirement
Here are some tips to get the most out of Social Security if you have received SSDI:
- Try to extend SSDI as long as possible before converting to retirement benefits.
- Consider delaying retirement benefits past full retirement age to earn delayed credits.
- Compare spousal benefits vs. your own retirement benefit and choose the highest amount.
- Coordinate the timing of your SSDI conversion and retirement claim with your spouse.
Other Key Facts About SSDI and Retirement Benefits
- SSDI has no assets or resources test. Retirement benefits may be taxable if your combined income exceeds certain thresholds.
- SSDI benefits are not reduced if you claim workers’ compensation or other public disability benefits. Your Social Security retirement benefit may be affected by certain government pensions.
- There are tax implications to receiving Social Security benefits. Up to 85% of your SSDI or retirement benefits may be taxable.
- Medicare eligibility rules differ slightly between SSDI and retirement. With SSDI, you get Medicare coverage after 24 months of disability benefits. For retirement, you get Medicare at 65 as long as you have 40 work credits.
The Bottom Line
In summary, SSDI and Social Security retirement benefits are separate programs with different eligibility rules. While the benefit formulas are similar, average payouts are higher for retirement benefits. You can receive SSDI and retirement benefits at the same time, but the amount will be coordinated. With some planning, you can maximize your total Social Security income.
Here is a table summarizing some of the key differences between SSDI and retirement benefits:
| Factor | SSDI | Retirement Benefits |
|---|---|---|
| Eligibility | Unable to work due to disability | Reach eligible retirement age |
| Average benefit amount | $1,358 per month | $1,827 per month |
| Family benefits? | Yes | No |
| Work allowed? | Limited | Unlimited |
As this table illustrates, while SSDI and retirement benefits share some similarities in how they are calculated, they serve different purposes for Social Security beneficiaries. Understanding how the two programs coordinate can help you maximize your total benefits.
Social Security is a crucial source of income for many disabled and retired Americans. Navigating SSDI, retirement benefits, and how they interact can be complicated. Consulting with a financial advisor or Social Security expert can help you optimize your strategy to utilize both programs.
With some knowledge and planning, you can make the most of the Social Security benefits you’ve earned over your working life. SSDI provides vital income support if you become disabled. Retirement benefits offer earnings replacement when you reach your golden years. Using them together appropriately allows you to fully realize the value of your Social Security contributions.
Some key takeaways on how SSDI and retirement benefits fit together:
- SSDI pays benefits if you’re disabled and can’t work. Retirement is based on reaching eligible ages.
- The benefit calculation formulas are similar, but SSDI pays less on average.
- It’s possible to receive both SSDI and retirement, with coordination of benefits.
- Strategic filing choices let you optimize your total income from both programs.
- Consult an expert to understand your SSDI and retirement options.
With SSDI supporting you through disability and retirement benefits providing income later, Social Security gives you the foundation for financial security throughout life’s changes. Learning how the two coordinate equips you to take full advantage.
