Ask Rusty – How Does Social Security Disability Work with Private Disability Insurance?

Dear Rusty: If someone is collecting long-term disability through their company and the company states the employee also must apply through Social Security, how does this work? Does the amount of Social Security decrease from the amount that the person would normally receive upon retirement? Is long-term disability for life, or just until you are of retirement age? How about for the spouse of that individual? Would it have any impact on them? Signed: Concerned

Dear Concerned: It’s common for private long term disability (LTD) insurers to require that you apply for Social Security Disability Insurance (SSDI) benefits. Typically, the private LTD benefit will be offset (reduced) by the federal SSDI benefit.

The SSDI benefit amount, if awarded, will be the full Social Security benefit earned up to the point the recipient becomes disabled and unable to work. That means someone on SSDI before full retirement age (FRA) gets their FRA amount earlier (FRA is somewhere between 66 and 67 depending on the year of birth). The SSDI benefit will be based on the disabled person’s lifetime earnings history, unreduced for claiming earlier than full retirement age. SSDI will automatically convert to regular SS retirement benefits at the same amount when FRA is attained. Thus, getting SSDI doesn’t detract from the person’s FRA benefit amount; rather they get their FRA amount earlier.

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