The Financial Vulnerability of Former Disability Beneficiaries in Retirement
At full retirement age (FRA) and again two and four years later, DI beneficiaries and early OASI claimers had substantially lower income and wealth than those who claimed OASI at or after FRA, and were significantly more likely to be in poverty. While the size of the gap between the groups does not grow in the years following retirement, DI beneficiaries start with substantially lower wealth upon which to draw. DI beneficiaries also receive a substantial share of their post-FRA income from Social Security benefits, a much higher share than early or later OASI claimers.
By their early 60s, one in four workers has experienced the onset of a work-limiting health condition (Johnson et al. 2007), and nearly four in five adults in this age group have experienced the onset of a chronic health condition (Smith 2003). Older workers who develop significant medical conditions or impairments face declines in earnings, income, and consumption and an increase in poverty (Schimmel and Stapleton 2012; Meyer and Mok 2014). In addition to these effects, leaving the labor force during peak earning years may have a lasting impact on financial security after retirement. In this brief, we consider the post-retirement financial well-being workers who received Social Security Disability Insurance (DI) benefits to that of people who claimed Social Security Old Age and Survivors Insurance (OASI) benefits without receiving DI. We consider those who claimed OASI before FRA (between ages 62 and 66) and those who claimed OASI at or after FRA. We also consider the experiences of two DI beneficiary groups, based on when they first received DI—before or after age 59.