Will My Disability Benefits Change When I Turn 65?

This is a common question among people who receive Social Security Disability (SSD) benefits and who are approaching retirement age. They wonder whether their monthly benefit amount will be reduced when they turn 65, and if so, by how much. The answer across the board is, “No,” your benefits will not change when you reach your full retirement age. We’ll explain why below, but first, let’s look at how to tell when you will begin to receive your Social Security Retirement benefits instead of your SSD benefit payments.

65 Is No Longer the Universal Age for Social Security Retirement Benefits

When Social Security first started providing benefits to older workers, 65 was the age at which everyone who was eligible began to receive their benefit payments. This all changed in 1983 when the system was changed to help strengthen the Social Security system’s financial viability into the future. While the age of retirement changes is still being phased in, only people born before 1943 still reach full retirement age at 65.

Full Retirement Age Is Between 66 and 67, Depending on Your Birth Year

Concerns about the long-term financial health of the Social Security Trust Fund, from which Social Security benefits are paid, led Congress to raise the “full retirement age” (FRA) for everyone born in or after 1943. By making people delay their receipt of Social Security Retirement benefits, the government thought it would slow the depletion of funds held in the account paying the benefits.

Here’s how each person’s new retirement age is determined:

Social Security Disability and Social Security Retirement Pay the Same Benefit Amount

If you are receiving Social Security Disability benefits, don’t worry about your benefit amount being reduced when you reach you full retirement age and your benefits switch over to the Social Security Retirement program.

Both programs determine your benefit amount using precisely the same figures, based on exactly the same data, and using the identical formula to reach the final payment amount.

Why do both SSD and Social Security Retirement use the same numbers and formulas?

The reason both programs use the same process to determine your benefit amount is that the SSD benefit is intended to be paid only to long-term or permanently disabled individuals. If someone is so profoundly disabled that they can’t work, and they may never return to gainful employment, then they are essentially retired involuntarily earlier than they planned. The SSD program simply begins to pay the disabled former worker a benefit amount corresponding to a specific portion of their usual earnings.

Let’s look at how the Social Security Administration (SSA) determines both your SSD benefit amount and your Social Security Retirement benefit amount using the same formula.

Formula Used to Determine Both Your SSD and Your Retirement Benefit

The starting point in the equation used by both SSD and Soc. Security Retirement to determine your benefit amount is a review of your lifetime annual taxable earnings. The Social Security Administration takes your 35 highest annual earning years and adjusts each of them by “indexing” them with each respective year’s national average income. This indexing process ensures that the increasing relative costs of living over the years is accounted for.

Once all your 35 highest annual incomes are indexed, they are added together and divided by 35 to produce your average indexed annual income. That figure is then divided by 12 to produce what is called your Average Indexed Monthly Income (AIME).

Then your AIME is run through the following formula to find your Primary Insurance Amount (PIA) which is your benefit payment figure. Let’s take a sample AIME for a hypothetical person named John Beta.

John Beta’s Average Indexed Monthly Income (AIME) is $6,450.

Formula

• Take 90% of the first $1024 of John Beta’s AIME = ($1,024 x .90) $921.60, plus
• 32% of the AIME between $1,024 and $6,172 = ($6,172 – $1,024 = $5,418) $5,148 x .32 = $1,647.36, plus
• 15% of any amount of AIME above $6,172 = ($6,450 – $6,172 = $278) $278 x. .15 = $41.70
• Result: $921.60 ¬+ $1,647.36 + $41.70 = $2,610.66
• Reduce the amount to next lowest $0.10 if not multiple of 10 = $2,610.60 is PIA (Benefit Amount)

This formula can be applied by any SSD benefit recipient or soon-to-be retiree to determine the amount of their monthly benefit payment.

Make sure to note, however, that claiming early retirement at age 62 or any time before you reach your full retirement age (RTA) will reduce your SSD monthly payment because claiming early retirement benefits waives up to 30% of what would otherwise be your full retirement payment amount. For more information about how your benefits would or would not change when you retire.