For older workers who are struggling with a serious medical condition, deciding whether to take early Social Security retirement benefits or apply for Social Security Disability Insurance (SSDI) can be a difficult financial decision. While both programs provide monthly benefits, they have different eligibility requirements and may have significantly different long-term financial consequences.
Understanding Early Retirement Benefits
Social Security retirement benefits can generally be claimed before a person reaches full retirement age. However, choosing to begin benefits early usually results in a permanent reduction in the monthly benefit amount.
For some individuals, early retirement may be the simplest option because eligibility is primarily based on age and work history rather than the severity of a medical condition. An applicant does not need to prove that an illness or injury prevents them from working.
However, taking benefits early may mean receiving a lower monthly payment for the rest of the individual’s retirement years. This can be an important consideration for someone who expects to rely heavily on Social Security income.
Understanding Social Security Disability Benefits
SSDI is intended for individuals who have a qualifying disability and sufficient work history. To qualify, an applicant generally must demonstrate that a medically determinable physical or mental condition prevents them from performing substantial work and is expected to last at least 12 months or result in death.
Unlike early retirement benefits, SSDI benefits are generally based on the individual’s earnings record without the same early-retirement reduction. This may result in a higher monthly benefit for someone who qualifies.
Additionally, once a person receiving SSDI reaches full retirement age, their disability benefits generally convert to retirement benefits without requiring a new application.
Which Option Is Better?
There is no single answer that applies to everyone. For a person who is unable to work because of a serious medical condition, applying for SSDI may provide greater long-term financial security if they meet the program’s requirements.
However, SSDI applications can take time and may be denied initially. Early retirement benefits may provide a more immediate source of income for someone who has reached the minimum retirement age and does not want to go through the disability application process.
In some situations, a person may begin receiving early retirement benefits while pursuing an SSDI claim. If the disability claim is later approved, Social Security may adjust the benefits accordingly.
Making an Informed Decision
The best choice depends on a person’s age, health, work history, financial needs, and ability to meet Social Security’s definition of disability. Before making a decision, individuals should carefully consider how each option could affect both their current income and their long-term financial security.
