Disability Payments & Retirement at 65: What You Need to Know

Disability payments may be rolled over into retirement payments, paid in lieu of retirement payments, or paid in addition to retirement payments. People receive disability payments from sources including private insurance, Social Security and the U.S. Department of Veterans Affairs (VA). People who receive disability from the VA may also receive disability from Social Security or another program. Disability benefits may or may not be affected when you reach the retirement age of 65.

Social Security Disability

Social Security disability benefits will automatically convert to Social Security retirement benefits when you reach full retirement age. However, the amount you received while disabled from Social Security remains the same when you retire. Your Social Security benefits will not increase.

Veteran's Administration

The VA has two main programs. A person can receive payment from one or the other, but not both. The non-service-related pension is the VA's term for retirement benefits. Non-service-related pensions cannot be paid to people receiving service-related disability payments. You can apply for a retirement pension while receiving disability, and if you're approved, the VA will pay you the higher of the two amounts. Neither VA program will affect your Social Security benefits.

Private Disability Insurance Plans

Private disability insurance plans come in many forms. One type of disability policy will make payments to your retirement plan if you become disabled. Self-employed and home-based business owners can purchase policies to replace their incomes if they become disabled. Also, many companies offer a disability insurance program to their employees as a fringe benefit. These programs are designed to cover you until you reach 65 years of age and are eligible to draw from your retirement plan.

Workers' Compensation Benefits

According to the Social Security Administration, "Workers' compensation and other public disability benefits may reduce your Social Security benefits. Workers' compensation benefits are paid to a worker because of a job-related injury or illness. They may be paid by federal or state workers' compensation agencies, employers or by insurance companies on behalf of employers."

When you turn 65, your Social Security retirement benefits will increase by the amount that was disallowed due to these other benefits. For example, if your Social Security benefits were decreased by $200 due to Workers' Compensation, when you turn 65, you will begin to receive the additional $200 per month.

Time Frame

As of 2010, the Social Security full retirement age is age 67 for people born after 1960. Social Security disability payments continue until you reach your full retirement age.