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Question:

I wanted to confirm that an SSI recipient must apply for their Social Security benefits when they turn 62 based on a friend’s recent personal experience. About 10 weeks after their 62nd birthday, they had a phone call appointment (set by the Social Security office via a letter they received weeks before the appointment) with a Social Security representative. During the call, they applied for their Social Security benefit, as instructed. Their SSI benefit amount will drop to a small amount since the amount of their Social Security benefit was nearly the amount of their SSI benefit.

Response:

For those readers who are unfamiliar with Supplemental Security Income (SSI), it is the safety-net income program for individuals who are disabled, blind or over age 65. The monthly benefit varies from state to state depending on how much they supplement that basic federal benefit which is $841 for an individual and $1,261 for a married couple in 2022. Six states — Arizona, Arkansas, Mississippi, North Dakota, Tennessee and West Virginia — provide no supplement. It turns out that it’s a bit difficult to find the state-by-state benefit levels, which can also vary by county, living situation, and type of qualification (aged, disabled or blind), but by way of example it appears that in 2022 a disabled beneficiary in Massachusetts will receive $955.39 a month.

In order to qualify for SSI, the beneficiary’s “countable” assets must be under $2,000. Virtually all assets are countable except one’s home. This $2,000 figure has not changed since 1984 and would now be more than $5,600 if it were simply indexed to inflation. (Of note, tax rates, including those for the estate tax are indexed for inflation. So, the amount the rich can pass on to their families tax free automatically increases each year and is now more than $12 million for an individual and $24 million for a married couple.) As of this writing, there’s a bi-partisan bill in Congress to increase the resource limit to $10,000 and index this amount to inflation. You can learn more about this here.

In addition to the SSI asset limit, SSI has an income set-off. Beneficiaries lose $1 of SSI for every $1 of income they receive from other sources. So, a beneficiary in Massachusetts receiving a pension paying $255 a month would see their SSI benefit reduced to $700 so the total of both would still be $955 a month. This is where your question comes in. Are SSI beneficiaries required to begin receiving their Social Security retirement benefits at the early retirement age of 62 in order to offset their SSI benefits? I wasn’t sure about the answer to your question, so I asked my colleague, Mark Bronstein, my “go-to” person for all questions involving SSI and Social Security Disability Insurance (SSDI). He says you’re right:

At 62, SSI is the payor of last resort, so claimants must apply for any other benefits as soon eligible, even if they would collect more if they waited. See https://secure.ssa.gov/poms.nsf/lnx/0500510001

In your friend’s case, it sounds like their early Social Security retirement benefit is lower than their SSI, so their monthly benefit will remain the same. The dollars will just come in two checks (or direct deposits) instead of one. This has both a good side and a bad side. In most states, if you receive SSI you also automatically qualify for Medicaid to cover your health care costs. For your friend this will continue and at age 65 they will begin receiving Medicare coverage as well. At that point, they’ll be receiving SSI, Social Security, Medicaid and Medicare. Depending on the state, if your friend’s Social Security benefit exceeded the SSI stipend, they might lose their Medicaid, leaving a three-year gap until they qualified for Medicare.

The potential bad side of this forced early retirement for your friend is that they won’t be able to postpone taking Social Security retirement benefits. The longer you postpone receiving Social Security, up until age 70, the larger your monthly benefit for life. Like most aspects of our system, this favors those who can afford to wait. They’ll receive greater benefits for as long as they live. Those who can’t, will receive lower benefits for the rest of their lives. The rule that SSI beneficiaries must take their retirement benefits at the earliest opportunity locks them in to lower benefits for life. This may, however, be academic for your friend if their earned Social Security benefits are so low that even with the increased benefit they would receive if they waited until age 70 they’d still be below the SSI level.

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How Can SSI Beneficiary Keep Medicaid Coverage When He Must Take Social Security? What Happens to Medicaid When You Switch from SSI to SSDI? Will Taking Social Security Early Affect My Disabled Daughter’s Benefits?