Page 4

December 2000

Qualifying for Social Security Disability benefits

Social Security Disability Insurance is, in effect, early retirement for workers who become so disabled that they are no longer able to work. In order to be eligible for Social Security Disability insurance, a worker must have earned at least 40 credits (or 40 quarters of coverage) and at least 20 of those credits must have been earned in the past ten years. Thus, in order to obtain disability benefits, he or she must be fully and recently insured. Disability under Social Security is based on the inability to work. A determination of disability is made if the worker cannot do work he or she did before and cannot adjust to other work because of his or her medical condition(s). The disability also must last or be expected to last a year or to result in death. Workers 31 and younger are insured if they worked half the years after age 21. After normal retirement age, 65, there is no disability insurange because full normal retirement benefits are in effect at that time.

Source:Social Security Administration Web Site, 2000 (

information on employer benefits (pension, health and disability insurance), personal wealth, and health status.

Summary of Major Findings

Characteristics of Workers Selecting Different Retirement Pathways

  • Older workers are not universally eligible for Social Security old-age benefits, and those with little retirement wealth are the least likely to be insured (Figure 1: OASDI Insured Status for HRS Respondents by Age and Sex).
  • Workers selecting early or normal retirement (ER or NR) are both healthier and better educated than those who ended up on disability retirement. Those who took ER are demographically similar to those who took NR.
  • The amount of benefit workers can anticipate from social security is very similar for those selecting NR and ER but is far lower for those who become DR retirees. DR retirees have less housing wealth and fewer financial assets even before they retire on disability.

Effect of Reducing Early Social Security Benefits on Retirement Wealth

  • Putting together all sources of retirement wealth, workers in the median 10 percent of wealth could anticipate a present value of DR wealth of $451,000; by contrast, the ER path is worth about $522,000 and the NR path around $611,000.
  • To simulate a reduction in ER benefits, we recalculate these numbers assuming that the value of ER benefits was reduced by $25,000 while other sources remained the same. We find the largest percentage decrease in expected retirement wealth is for workers with the lowest retirement wealth.
  • The hypothetical benefit cut would have the largest impact on the poorest workers, who, in this sample, are more likely to be black, have less education, and be in poor health.

Effect of Reducing or Eliminating Early Social Security Benefits on Retirement Pathway

  • The hypothetical reduction of $25,000 in ER benefits would be expected to change retirement patterns:

    [continued on page 5]

Page 1 2 3 4 5 6