Can I Draw Disability And Retirement
Applying for Disability benefits has a reputation every bit a fourth dimension-consuming and inefficient process. Consequently, many people entering their 60s who could potentially authorize for inability benefits may opt to just elect for Social Security a couple of years early on to avoid the hassle. However, this strategy has the potential to cost you a lot of coin in the long run. Whether opting for inability would be the more remunerative strategy will depend on your age. A financial advisor could help you lot weigh the best options for your retirement goals.
Calculating Your Benefit Corporeality
The formula for computing your Social Security benefits and your disability benefits is exactly the same right up until the very finish. We'll get into how it diverges in the next section, but for now, nosotros'll focus on the shared process.
The showtime pace is computing your average indexed monthly earnings (AIME). The Social Security Administration (SSA) will have your 35 highest-earning years into consideration. For each of those years, information technology will index your income for inflation and include information technology up to the taxable maximum (the betoken at which you terminate paying Social Security taxes). For taxation twelvemonth 2022, this point is $142,800. For revenue enhancement year 2022, the maximum rises to $147,000.
Adjacent, the SSA will add together up these totals and divide to go your AIME. If you accept more than 35 earning years, your lowest years will be excluded. If you take fewer than 35 earning years, the SSA volition include a $0 in the calculation for every yr y'all're brusque.
The terminal step is to calculate your principal insurance amount (PIA) from your AIME. To calculate your PIA, the SSA will accept a percentage of three different chunks of your AIME. The exact amount of these portions will differ slightly depending on the twelvemonth you go disabled or plough 62. If you do either in 2022 the SSA volition accept xc% of your starting time $996, 32% of the amount between that and $half-dozen,002 and fifteen% of anything that remains. The total is your PIA.
When Does Disability Pay More Social Security?
Your PIA is the corporeality you lot'd receive if y'all were to qualify for disability benefits. Information technology's not that elementary with Social Security benefits, however. While you're technically eligible to brainstorm taking Social Security benefits at age 62, you won't receive your PIA until your full retirement age (FRA), which will fall somewhere between 66 and 67. At 62, your benefit corporeality would exist only 70% of your PIA, increasing gradually until y'all reach your FRA.
| Total Retirement Age | |||||||||
| Year of Nascency | FRA | ||||||||
| 1943-1954 | 66 | ||||||||
| 1955 | 66 and 2 months | ||||||||
| 1956 | 66 and 4 months | ||||||||
| 1957 | 66 and 6 months | ||||||||
| 1958 | 66 and viii months | ||||||||
| 1959 | 66 and 10 months | ||||||||
| 1960 and later | 67 | ||||||||
This means that between 62 and your FRA, your inability benefit would be higher. And there'south an additional benefit to taking disability: Past electing for disability instead of Social Security, you allow your Social Security benefit to continue growing.
This disparity is even greater if you happen to become disabled later y'all turn, say, 63. The reason here is that your Social Security benefits volition be determined by your PIA for the year you turn 62, while your disability benefits would be calculated with your PIA for the next yr. Provided your AIME is the aforementioned or higher, and so your PIA for the later yr volition be higher.
When Does Social Security Pay More Disability?
The contrary of the above situation is truthful if you are between your FRA and historic period seventy. After you lot reach your FRA, your Social Security benefit amount increases by 0.8% for every month you hold off on claiming your benefits. This continues until you achieve 70, at which point your benefit reaches its maximum. In this situation, your monthly Social Security benefit would be larger than your monthly disability benefit.
Bottom Line
Information technology's easy to get lost in all the different acronyms and calculations that come along with Social Security benefits. However, if you're wondering if disability would pay more, but ask yourself where y'all are relative to your full retirement age.
If you're under it, disability will exist higher. If you're above it, Social Security volition be college. Simply like with whatsoever other Social Security issue, the fashion you can optimize your feel is by thoroughly agreement all of your options.
Tips for Navigating Social Security
- A financial advisor tin help yous business relationship for the various sources of retirement income, including Social Security benefits. Finding a qualified financial counselor doesn't have to be hard. SmartAsset'southward complimentary tool matches you with up to 3 financial advisors in your expanse, and you can interview your advisor matches at no toll to determine which one is right for you. If yous're set to discover an advisor who tin help you lot achieve your financial goals, go started now.
- If yous're applying for Social Security disability benefits, you'll need to make full out class SSA-827. This provides your consent for the SSA and Disability Determination Services (DDS) to view your medical records.
- Dealing with a disability, either temporary or permanent, is hard enough without considering the financial impact. Having an emergency fund in place for unpredictable things like this tin can be a huge relief.
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Source: https://smartasset.com/retirement/does-disability-pay-more-than-social-security
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