How Early Can You Retire If You Have a Disability?

Becoming disabled and unable to work places an incredible financial stress on you. Depending on your disability, age and how many years you have contributed into the Social Security system, you may or may not be qualified for Social Security Disability benefits. Retirement is an option depending on your budget requirements and retirement income prospects.

Social Security Disability

In order to qualify for Social Security Disability payments you must have the required number of credits recorded in your file. While the amount of earnings required for a credit change from year to year, you have the ability to earn more than one credit per year. The 2010 credit earning requirement is $1,120 of wages or self-employed income. Once you have 40 credits, at least half of which were earned within the past 10 years, you qualify for disability income. Workers too young to qualify may receive an exception by the Social Security Administration. Disability benefits serve as your income source until you reach retirement age and you switch to retirement benefits.

Selecting Early Retirement

Once you have the 40 credits earned in through the SSA, you can elect early retirement once you are disabled. According to a Virginia Commonwealth University paper titled "What are some advantages and disadvantages of electing early retirement vs. remaining on disability benefits?" the choice to elect retirement is complicated. Most receive less in retirement benefits, ultimately losing up to $1 for every $2 earned above the annual limit until they reach retirement age, when the limit is lifted. However, electing early retirement allows you to work above the disability work requirement defining how much work you can do through the Substantial Gainful Activity.


Regardless of your age, if you choose early retirement and later decide that disability benefits would be more advantageous, you can re-elect disability benefits. The ability to re-elect goes both ways as you can choose to stop disability benefits and get early retirement benefits. Speak with a Social Security adviser about what options are best-suited for your situation.

Other Retirement Assets

If you have qualified retirement assets such as a 401k, 403b or IRA plan, you may access these assets under IRS disability provisions. Normally, early distributions before age 59 1/2 result in a 10 percent tax penalty. The penalty is waived for disability regardless of whether you are taking periodic distributions or regular distributions. Let the qualified plan custodian know that the distribution is a disability distribution so the 1099-R properly records the distribution as an exemption. When you file your taxes, you will include the income as part of your annual gross income but will incur no penalty regardless of age.