Should a Person Take Early Retirement and Apply for Social Security Disability?

Let's say Sam, age 60, became disabled on January 1, 2010. He wants to apply for Social Security Disability and he has no other source of income. If he wins his disability case, he would receive $1,500 a month until he reaches full retirement age at age 65. At full retirement age his benefit would be $1,750 per month. If he were to take early retirement, his retirement benefit would be $1,250 per month. Should he take early retirement and also apply for Social Security Disability benefits?

If Sam is ultimately successful with his disability claim, the short answer is YES. He should. In fact, while the early retirement benefit is lower than if Sam waits until full retirement age, the early retirement will likely provide a much needed source of income while he is waiting for a decision from Social Security on his disability claim.

What happens if Sam wins his disability claim? In this situation, Sam will have begin receive the disability benefit and the early retirement benefit will no longer be paid. Sam will also receive a back benefit for the difference between the disability benefit amount and the early retirement amount for each month where he was entitled to the disability benefit and did not receive it. This is because the disability benefit tends to be higher than the early retirement benefit. But, better yet, Sam's full retirement benefit will be reinstated when he reaches full retirement age. At full retirement age, the disability benefit stops and the full retirement benefit begins.

What happens if Sam loses his disability claim? In this situation, Sam will at least have his early retirement paid to him on a monthly basis. But, the drawback of course, is that Sam will now be stuck with the lower monthly early retirement benefit instead of his full retirement benefit.