Does a workers’ comp settlement affect Social Security retirement?

Workers Compensation - December 12, 2025

Yes, a workers’ comp settlement can affect Social Security Disability benefits, but it usually does not reduce Social Security retirement benefits once you reach full retirement age. The Social Security Administration applies a workers’ compensation offset only in disability cases, not standard retirement benefits.

If you’re unsure how your benefits interact, speaking with a Joliet workers’ compensation lawyer can help you avoid costly mistakes before you settle.

How does workers’ compensation affect Social Security Disability benefits?

If you receive both workers’ compensation benefits and Social Security Disability Insurance (SSDI), the Social Security Administration may reduce your SSDI payment. This is known as the workers’ compensation offset. Many injured workers confuse these programs, so it helps to understand the difference between workers’ comp vs. disability benefits before looking at how offsets apply

Under federal rules, the total amount you receive from SSDI and workers’ comp combined generally cannot exceed 80 percent of your average current earnings. If the total goes over that limit, SSA reduces your SSDI payment until it falls back within the allowed range.

This offset applies only to disability benefits. Private pensions and retirement savings do not trigger this reduction.

How are average current earnings calculated?

Average current earnings, often called ACE, are used to determine whether your combined benefits exceed the 80 percent threshold. The SSA typically calculates ACE by looking at your highest-earning year during a set period before your disability began, often within the five years leading up to your injury.

Because this figure directly affects how much you can receive each month, errors in your earnings history can cost you money. Making sure SSA has accurate wage records is critical.

Will workers’ compensation affect Social Security retirement benefits?

In most cases, no. Once you reach full retirement age, SSDI automatically converts into Social Security retirement benefits. When that happens, the workers’ compensation offset no longer applies.

Full retirement age is generally between 66 and 67, depending on your birth year. After that point, workers’ compensation payments do not reduce your Social Security retirement benefits.

However, if you choose to take early retirement while still receiving workers’ comp benefits, SSA may temporarily apply disability-related calculations until you reach full retirement age. This can make the timing of retirement an important decision.

Can I receive both workers’ compensation and Social Security at the same time?

Yes. Many injured workers receive both benefits at the same time. The key issue isn’t whether you can receive both, but how they’re coordinated.

Without proper planning, offsets can reduce your SSDI payments more than necessary. This is one of the most common ways injured workers lose money without realizing it.

How does a workers’ compensation settlement impact SSDI?

If you receive a workers’ compensation settlement as a lump sum, SSA doesn’t ignore it. Instead, the agency prorates the settlement over time as if you were receiving weekly payments. That prorated amount is then used to determine whether an offset applies.

Depending on how a settlement is structured, a lump sum can temporarily reduce or eliminate SSDI payments. In some cases, legal language in the settlement agreement may help limit how much SSA counts each month, but this depends on the facts of your case and isn’t guaranteed.

Protecting your benefits before you settle

Workers’ compensation settlements and Social Security benefits don’t always work together smoothly. A settlement that looks fair on paper can reduce your monthly income for years if it isn’t handled carefully.

If you’re receiving workers’ comp and SSDI, or nearing retirement, it’s important to understand how these systems interact before agreeing to a settlement. Horwitz, Horwitz & Associates offers free consultations to help injured workers protect the benefits they’ve earned. Call (800) 985-1819 or contact us online to get clear answers before you settle.