Q & A

I have been receiving Social Security disability benefits since 1995. I am now 63 years old. I know that when I turn 66 my Social Security Disability Insurance program (SSDI) will automatically roll over to regular Social Security retirement benefits at the same rate. Here is my question: Since I’m eligible for early retirement, can I make the switch from SSDI to regular Social Security without a penalty? If the rollover is at the same rate at age 66, it seems like the same would hold true earlier.

Answer: Your disability benefit will just change names and be called your retirement benefit when you reach full retirement age. It won’t be changed. You can, however, choose at full retirement to suspend your retirement benefit and restart it at 70 when it will be 32 percent larger after inflation.

You could apply for and choose to receive reduced retirement benefits at age 63, even if you are still entitled to disability. However, your benefits would be about 20 percent lower until you reached full retirement age, at which point you would return to the full rate. If you switched to retirement benefits at age 63 without also being entitled to disability benefits, the 20 percent reduction would be permanent. The only reasons for a person on disability to apply for reduced retirement benefits is if their disability benefits are being offset due to receipt of workers compensation or public disability benefits, or if they have eligible children who would receive higher benefits under the more generous family maximum benefit formula that applies to retirement accounts.

Source: Laurence Kotlikoff: a William Fairfield Warren Professor at Boston University, a Professor of Economics at Boston University, a Fellow of the American Academy of Arts and Sciences, a Fellow of the Econometric Society, a Research Associate of the National Bureau of Economic Research, President of Economic Security Planning, Inc., a company specializing in financial planning software, and the Director of the Tax Analysis Center

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