12 Nov What happens to my disability when I turn 62?

Q. I have been on Social Security disability since age 55. I was born in 1962. I have been told that at age 62, disability will turn into regular Social Security payments and the amount would be the same as the disability payments. Is that correct? What would happen if I want to delay Social Security until age 70?
— Planning ahead

A. It’s not that simple.

For individuals born in 1960 or later their full retirement age (FRA) for Social Security retirement benefits is age 67.

An individual whose FRA is 67 but who starts collecting at age 62 will receive roughly 70% of their FRA age benefit, said Michael Maye, a certified financial planner and certified public accountant with MJM Financial in Gillette.

He said if your disability payment exceeds your age 62 Social Security retirement benefit, then you would be better off staying on disability until your FRA.

“Once you turn age 67 your Social Security disability benefits stop and at that point you can start your Social Security retirement benefit,” Maye said. “At age 67 (FRA) your Social Security disability benefit and your Social Security retirement benefit will be the same amount.”

You, like any other individual, can defer that benefit out to age 70 to receive a higher payment, Maye said.

“In order to defer collecting your Social Security retirement benefit past age 67, you will need to proactively contact Social Security to postpone or defer it,” he said. “Otherwise, your Social Security disability payment will automatically convert over to your FRA social security retirement benefit.”

So the question will come down to whether you have enough other resources or assets to allow you to defer your Social Security retirement benefit out till age 70.

This is where working with a planner can be helpful in assessing that question, Maye said.

“Another important thing to note is the FRA is normally based upon your average monthly income for your 35 highest earning years,” he said. “For disabled individuals, their FRA is instead calculated on their average income from age 21 until the year they became disabled.”

This modification is made so disabled individuals are not penalized if they do not have 35 years of earnings, Maye said.

“Certain individuals’ Social Security disability payments may be reduced if they are collecting Workers Compensation or worked for a government employer where Social Security taxes were not collected from their pay when they were working,” Maye said.

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This story was originally published on Nov. 12, 2020.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.