If you’re retiring early for health reasons, do you know what benefit to file for when you claim Social Security?
Most people don’t, and simply assume they just need to file for retirement benefits. But if you could receive disability benefits instead, choosing to file normally could cause you to miss out on a lot of money.
Let me tell you this story to explain how.
Social Security Retirement Benefits Might Make More Sense to You… But They Could Be the Wrong Benefit to Take
Not long ago, a client came into my office and told me that he needed to retire earlier than we’d planned for. What started out as a tick bite turned into Lyme disease, and then that manifested itself in multiple debilitating symptoms.
It was a very sad situation, not only because of the complications from the disease but because this client loved his work. He built a successful business from the ground-up and never planned to stop working entirely. He enjoyed what he did and took pride in his successes.
But life threw him a curveball and he finally had to admit that he just couldn’t do it anymore. He completely turned the business over to his son and was getting other matters in order before he left the country to seek alternative treatments for his Lyme.
“I know my plan was to file for Social Security at my full retirement age and I never thought I’d be doing this at 62,” he said to me when we talked, “but there’s just too much uncertainty now.”
He thought the best thing to do was go ahead and file early and start taking Social Security benefits as someone who retired.
This would not have been a smart move to make.
The Right Thing to Do Might Be Filing for Disability Benefits (Not Retirement!)
I understood why my client thought the way he did. Life had changed and the plan we’d built needed to adapt with that.
But he was overlooking something really important. He didn’t need to file for retirement benefits.
He needed to file for disability benefits.
When I suggested this, he looked at me with some obvious skepticism. He was really proud of what he’d accomplished and did not view himself as disabled; just temporarily sick.
He felt confident in the out-of-the-country treatments he sought and believed he’d be back to work within a year. But at the same time, he was making a near-irrevocable decision with his Social Security.
Social Security Disability Is Not Welfare
First, please understand that Social Security Disability is not “welfare.” This is often the first mindset shift people need to make when thinking about filing for disability benefits.
Hard workers who take pride in the work they do can have a hard time filing for disability. They may say it’s because of the trouble you have to go through or the paperwork it requires… but the fact is, many of them are just embarrassed.
You can’t blame them; there is a stigma to disability. For some reason, it’s viewed by many as some sort of “welfare” (probably because of the much-reported abuses in the system).
But consider this: the same taxes that pay for your Social Security retirement benefits also pay for your disability benefits! That means if one is welfare, then so is the other.
The real fact is that neither of these programs are anywhere close to welfare. You paid taxes for the duration of your working career for access to whichever program meets your needs when you stop working.
You May Receive More Through Social Security Disability Benefits
Let’s take the labels off for a moment. If given a choice between two income streams that you earned a right to, would you choose the one that gave you 30% less than the other?
Of course not. You’d opt for the income stream that was 30% higher. And that’s what can happen with disability benefits.
A disability payment is most likely going to be higher than what you’d receive if you filed for early Social Security retirement benefits. Depending on your full retirement age, your social security benefit at age 62 will be between 70 and 75 percent of your full retirement age benefit.
Your disability benefit, however, is 100% of your full retirement age benefit. Here’s an example:
Assume your Social Security benefit at age 67 is $2,000. At age 62, you are in a car accident and cannot return to work. If you file for retirement benefits, your monthly amount would be about $1,400 for the rest of your life.
But what if you qualify and file for disability? Then you would receive the full $2,000 per month right away. If we assume a life expectancy of 85 years and add in the cost-of-living adjustments, that makes a difference of $219,000 in benefit payments.
(This doesn’t even take into account the impact to your survivors’ benefits if you die before your spouse!)
How to Make Filing for Disability Through Social Security Easier
There’s no question that it takes more work to get disability benefits than normal retirement benefits through Social Security. The process of applying for retirement benefits takes 15 minutes. The process to apply for and eventually receive disability benefits could take months.
You should still be prepared for some frustration if you file for disability. The process is not easy to understand and unfortunately, it’s designed to discourage instead of encourage applicants.
But with such a big difference in payment amounts, it’s probably worth the trouble — especially when you know the right resources and information to help you make the process easier.
It’s often easier to get approved if you’re older. For applicants past the age 60, the Social Security Administration has age-specific rules when it evaluates your disability.
If the Administration reviews your application and decides that your condition doesn’t meet a disability listing, they’ll refer to a separate set of rules called the grid to decide if you are disabled — and those rules are relaxed for someone who is over 60.
If you file for disability and are declined(and most people are), hire an attorney or advocate who specializes in this work. The statistics strongly suggest that your chances of approval will increase substantially if you have help at this step.
But don’t just hire anyone. I’ve seen some real yahoos that do divorces, bankruptcies, ambulance-chasing and oh yeah… some Social Security disability on the side! I hope it goes without saying, but don’t hire those people.
This is where I want to help you get connected with a pro. You can use this link to take you to a short questionnaire, consisting of 11 simple questions. This allows you to get a free disability benefit evaluation.
Once you get through this questionnaire, you’ll get paired up with someone who specializes in Social Security disability — and you’ll greatly improve your odds of getting approved and receiving a higher benefit than had you filed for retirement benefits alone.
Bonus Tip: Don’t Choose! File for Disability and Retirement
One thing you may want to consider is filing for both benefits at the same time. You can’t receive both at the same time, but if you need to quit work you may need the income now — and since disability payments can take a while to get approved, your retirement benefit would be paying you while you waited.
Once your disability benefit was approved, your payment would step up to the higher amount. Before you do this, you may want to talk to someone and find out what your chances are of getting approved for benefits. If you don’t qualify for disability, you could be stuck with the lower retirement benefit for the rest of your life.
This is why it’s so important to work with a trusted professional to ensure you’re making the right Social Security decisions at every step. It’s also why you should keep doing your research and learn as much as possible, so keep browsing the blog and using the free resources available to you here.