If you're a regular follower of our blog, then you may have read last week's post in which we talked about Social Security disability benefits in relation to retirement. As you may remember, we explained that your Social Security Disability Insurance does not just disappear when you retire but rather it converts into your retirement benefit and continues to provide financial security for you and your family.
But as you also might remember, we ended last week's post by pointing out that the Social Security Administration recently clarified how these benefits are supposed to convert when a person collecting disability benefits retires. Most people have long believed that they have the option to maximize their benefits by withdrawing prior to their retirement age, choosing instead to collect spousal or survivor benefits prior to age 70. Their SSDI payments would offset the reduction of retirement benefits, allowing a person to wait longer before collecting their full retirement benefits at age 70 when the amount is higher.
But according to some, the clarification made by SSA deletes this option.
According to the revisions, a person who chooses to withdraw their benefits in order to prevent the automatic conversion to retirement benefits is not only withdrawing from collecting their retirement benefits, they're withdrawing from collecting their disability benefits as well. This might come as a huge shock to a number of our West Caldwell readers who would then, according to the Administration, be required to pay back -- in full -- the disability benefits they have received.
If this change comes as a shock to you, know you're not alone. Many professionals who are knowledgeable in the Social Security system read the SSA clarification in the same way others did. Unfortunately, as was pointed out by David Cechanowicz, a director for a company that provides Social Security software to financial advisors, it could take a court to determine whose interpretation of the conversion law is actually correct.
Source: Investment News, "Social Security closes claiming loophole for people with disabilities," Mary Beth Franklin, April 14, 2015