When Does Social Security Disability Convert to Regular Social Security?
Social Security Disability Insurance (SSD or SSDI) pays monthly benefit to disabled workers and former workers who paid into the system during their years of employment. The SSD program is different from what some people call “regular Social Security,” referring to the pension benefit paid by Social Security to people who reach full retirement age.
In this blog post, we’ll explain what happens to your Social Security Disability benefits when you reach retirement age and begin to receive your Social Security Retirement benefits. MJ Ellis Disability Law specializes in helping people in the Norther New Jersey community get the disability benefits they deserve. Part of that mission is ensuring that all our clients understand how the system works. If you have questions about your right to disability benefits, give us a call. We’d be glad to get you the answers you need.
Social Security Disability Benefits Are Equal to Your Social Security Retirement Benefits
For many people, how the Social Security Administration (SSA) figures the amount of your Social Security Retirement (SSR) benefits is a mystery. To understand how and when your SSD benefits will convert into SSR benefit, you should know how the two programs relate to each other and how the formula works to determine your benefit amounts.
Social Security Disability Insurance benefits were designed to provide financial support to workers whose injury or illness prevent them from continuing to work. It is important to know that the amount of your SSD disability benefit payment amount is the same as you SSR retirement benefit payment amount. Only people who file for early retirement may see a change between their SSD and SSR payments.
How Your Disability Benefit Amount and Your Retirement Benefit Amount Is Determined
Everyone’s SSD benefit payment is determined by using the average annual income for their 35 highest earning years. This figure is then “indexed” using a system that considers what the average national income was in each of those years, the SSA reaches a figure called your Average Indexed Monthly Earnings, or AIME. Then they apply the following formula to find your Primary Insurance Amount (PIA):
- 90 percent of the first $1,024 of his/her average indexed monthly earnings, plus
- 32 percent of his/her average indexed monthly earnings over $1,024 and through $6,172, plus
- 15 percent of his/her average indexed monthly earnings over $6,172.
Then SSA rounds down to the next $0.10 if not already a multiple of ten cents.
If your Average Indexed Monthly Earnings (AIME) is $4,200, your SSD (disability) and SSR (retirement) benefit amounts would be figured as follows:
- First $1,024 x .90 = $921.60, plus
- Earnings between $1,024 and $6,172 ($4,200 – $1,024 = $3,176) $3,176 x .32 = $1,016.32, plus
- Earnings over $6,172 = 0 because AIME is $4,200, so there are no earnings above $6,172.
- Sum of $921.60 + $1,016.32 = $1,937.92
- Rounded down to next $0.10 brings the monthly SSD or SSR payment to $1,937.90 per month.
Disability Benefits Convert to Retirement Benefits at Full Retirement Age (FRA)
Social Security Disability benefits are a kind of early retirement justified by a worker’s inability to continue working up to their full retirement age. The “full retirement age” (FRA) used to be 65 for everyone. But financial strain on the Social Security Trust Fund and an imbalance between retirees and younger workers caused a change in the FRA for most people working today.
Anyone born from 1943 to 1954 now reaches full retirement age at 66 years of age. If you were born in any year after 1954, you add 2 months to age 66 to find your FRA. For example, people born in 1956 have a FRA of 66 and 4 months; those born in 1957 have an FRA of 66 and 6 months, etc. This continues until 1960 when anyone born that year or later have FRAs of 67 years old.
Only Early Retirement Will Reduce Your SSD Benefit at Full Retirement Age
As we explained above, the amount of SSD benefits is determined by the same formula used to find your full retirement age benefit amount. But if you retire early, your permanent retirement benefit amount would be reduced because you didn’t wait to reach your FRA. And depending on the year you were born, the reduction in your monthly retirement benefit payment will be reduced from 25% up to 30%.
That’s why it never makes sense for anyone receiving SSD benefit payments to file for early retirement anytime between their 62nd birthday and their FRA.
Claiming SSD Benefits After You Take Early Retirement
If you already claimed early retirement at age 62, or anytime before your full retirement age, you could still file for SSD benefits if you become disabled before you reach your FRA. Since you are still of working age, you would be eligible for SSD benefits if you meet other requirements (work credits, qualified impairment, etc.). If you took early retirement from SSA and then filed disability for a subsequent impairment, your reduced SSR pension payment would increase to the amount you would receive at full retirement age. Then, when you did reach FRA, your benefit would revert to the lower benefit amount because you took early retirement.