#5) Early Retirement or Social Security Disability? Understanding the Consequences of your Choice

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By Cheryl Coon

The information provided in this article is intended to give a general overview of the topic and is not intended as legal advice. For information specific to your situation, please talk with your Social Security/Disability professional.

Article #5, Early Retirement or Social Security Disability?  Understanding the Consequences of your Choice

As a social security disability lawyer who represents many folks in their fifties and sixties, I’m often asked about the pros and cons of choosing to take early retirement versus applying for disability benefits. Of course not every person who wants to stop working is doing so because of a disability.  Only some folks are potentially eligible for disability benefits.  Let’s review who is eligible.

Eligibility for Social Security Disability Benefits

There are two types of social security disability benefits:  Title II Social Security Disability Insurance Benefits (SSD) and Title XVI Supplemental Security Income Benefits (SSI).  Social security regulations provide for a five-step evaluation process to determine disability. 

To understand how this works, let’s talk about Joe and Mary.  Joe is 50 and still working, but he makes only $1000/month.  He has chronic back pain from his former heavy work.  Mary is 58; she used to clean houses but a heart problem forced her to give up this work.

Step 1: Is Claimant Working? 

If the claimant is working and has earnings at the “substantial gainful activity” level ($1040/month in 2013) he is presumed not disabled.  Joe is still working but he earns less than “substantial gainful activity” levels, so he can continue to Step 2.  Mary is no longer working so she too can go on to the next step.

Step 2:  Severity:

A claimant must have a “severe” medical condition — either mental, physical or both — defined as any condition that significantly limits his ability to work.  The condition must have lasted — or be expected to last — for 12 months and/or result in death. However, claimants with symptoms that wax and wane may still qualify if the active periods of their impairment keep them from working.  The cause of the impairment generally is not important.  Both Joe and Mary will likely be found to have severe medical conditions.

Step 3: Meeting or Equaling a “Listing”:

Certain listed medical conditions with specific symptoms require a finding of disability, e.g., systolic heart failure with ejection fraction of 30 percent or less. If an individual’s impairments match the requirements of a “listing”, he is found disabled.  Mary’s heart condition may entitle her to benefits without the need to meet the rest of the criteria.  But suppose her ejection fraction is above 30 percent?  In that case, she goes on to the next step.  Joe’s chronic pain does not meet any listing so he too goes on to the next step.

Step 4: Can claimant do previous work?

The next question is whether claimant can do any work that he did in the last 15 years.  Although Joe spent most of his working years doing heavy labor, he did spend a few years as a telemarketer.  He may be found capable of returning to that work.  In that case, he will not be eligible for benefits.  Mary’s heart condition precludes return to her work as a cleaner and she has never done any other kind of work.   She goes on to Step 5.

Step 5: Can claimant do other work?

If a claimant is unable to return to his previous work, the question is whether other full time work exists in significant numbers in the economy that the claimant can do. In this part of the evaluation process, the older a claimant is, the more likely it is that he will be found disabled. For example, a 50-year-old person who performed heavy unskilled labor all his life but is now limited to sedentary work may be found disabled while a younger person with the same circumstances may not.  If all Mary’s education was limited and her only past work is housecleaning, she may be found unable to do other work. She will be found to be disabled.

A few key messages: 

  • The reason you cannot work must be a significant impairment, based on medical evidence.
  • You must have been unable to work for 12 months before you will be approved.  If you broke your leg but it healed within 12 months, you will not get approved for disability.
  • Even if you are only able to work part-time, if in doing so you exceed the $1040/month limit, you will be presumed to be not disabled.

Let’s return to the question of early retirement vs. disability benefits.   Early retirement generally permanently reduces benefits when you reach retirement age.  What’s more, the amount you receive through early retirement will generally be less than your disability benefit amount.  So the rule of thumb is “Don’t opt for early retirement if you don’t have to.” 

However, there is an exception to the rule.

Let’s consider John, who takes early retirement through Social Security.  John has Parkinson’s Disease so he also applies for disability and ultimately is determined to have become disabled before his early retirement benefits started.  In that case, Social Security will make up the difference between the early retirement amount and the full disability amount for those months that John received early retirement benefits.  What’s more, when John reaches full retirement age, he will get his full retirement benefit, as if he had never opted to collect early retirement.

But, what happens if a person who opts for early retirement at age 62 later is approved for disability benefits but Social Security finds that the disability started after he opted for early retirement benefits?

Let’s return to Joe as an example.  When Joe is 62 years old, he opts for early retirement benefits.  At age 63, he applies for disability benefits again.  This time he is approved but Social Security finds that he was disabled after age 62.  Social Security will not pay Joe for the difference between his disability payment and the early retirement payment, and, although he will collect higher benefits for a few years, when he reaches full retirement age, he will be paid at a less-than-full retirement rate because he took early retirement.


Cheryl Coon previously led the social security disability section of Swanson Thomas Coon & Newton of Portland, Oregon, where she represented disabled individuals seeking benefits, at all stages of the process from application to federal court appeals.

Refugee Disability Benefits of Oregon
Refugee Disability Benefits of Oregon

In June 2016, Cheryl Coon founded RDBO. Refugee Disability Benefits of Oregon. RDBO takes a unique approach, in which attorney Cheryl Coon, works closely with health care providers, case managers and counselors, as well as the refugees they serve, to ensure that refugees’ cases are presented competently and compassionately. We handle cases at every step of the disability process, from initial application to hearing to federal court.

The social security disability process can be frustrating. We believe it is important for potential applicants to be realistic about their chances for approval. We carefully evaluate the merits of each person’s case and suggest alternatives when we do not believe their case is strong. These alternatives may range from vocational assistance to waiting until a stronger medical record has been established.

Cheryl F. Coon, Attorney at Law
Refugee Disability Benefits Oregon
1137 SW Broadway
Portland OR 97205

Phone: 971-270-0755
Website: www.rdbo.org
Email: cheryl@rdbo.org