Can You Retire While on Work Comp?

Retirement is something that every worker looks forward to. And while we all wish to retire in excellent health, sometimes a work-related injury or illness prevents us from living our best during the golden years. Employees may receive workers' comp to provide lost income, reimbursement for medical bills, and vocational training, but is this still the case when one is no longer in the workforce? In other words, can you retire while on workers' comp?

Table of Contents

To give you the answers you’re looking for and broaden your understanding, we’ll answer four of the most commonly asked questions about retirement and workers' compensation benefits, including:

How does retirement affect workers’ compensation?
What’s the difference between voluntary and involuntary retirement?
Do workers' comp benefits affect Social Security benefits?
How can an independent insurance agent help my retirement?

Be advised that workers’ compensation and retirement planning are difficult to understand. For help, consult an independent insurance agent today. These agents are trained in how workers’ compensation works in your state, as well as which options you may have for alternative coverage and retirement investment options to maintain a positive quality of life.

How does retirement affect workers’ compensation?

Considering that the workers' compensation system is designed to provide a financial safety net for those who are unable to work due to an injury — not for those who choose to withdraw from employment — retiring from the workforce has a number of outcomes.

First, when an employee decides to retire while receiving workers’ compensation, their employer is still required to pay for all medical expenses related to the work-related injury or illness. In order to get these benefits, the employee should follow the same steps for filing a workers' compensation claim as an employee who intends to return to work, including:

• Reporting the injury within the state’s guidelines — typically 30 days
• Submitting all of the required paperwork
• Adhering to the physician’s prescribed treatment plan

One of the key downsides of retiring while collecting disability benefits from workers' comp is that they can potentially expire if you’re no longer part of the workforce. What’s important to remember is that the extent of the injury and whether it is classified as a temporary or permanent disability factors into continuing workers' comp benefits:

• In most cases, temporary disability benefits are paid to a worker while they are recovering from a work-related injury or illness. If you are receiving temporary disability benefits and decide to voluntarily leave the workforce, these benefits will expire. 
• If your injury/illness is severe and your doctor has given you a permanent disability rating, you may be required to retire from the workforce. In this case, individuals should continue receiving disability benefits according to state guidelines.

This leads up to the next question, What’s the difference between voluntary and involuntary retirement?

What’s the difference between voluntary and involuntary retirement?

Voluntary Retirement

Just as the name implies, voluntary retirement is when an individual chooses to leave the workforce of their own volition. Individuals often choose voluntary retirement to remove themselves from the workforce to collect a pension and/or an incentive package. If an injured employee is able to do the same job or modified work that accommodates their restrictions, retirement would be considered voluntary, so workers’ comp disability benefits would end. 

For those who choose to retire voluntarily, an employer can file to cancel workers’ compensation benefits. Bear in mind that accepting a pension doesn’t necessarily mean an employee has chosen to voluntarily retire and give up their workers’ comp benefits. Instead, the employer must prove that a worker has given up the search for work or otherwise removed themselves from the workforce. 

Involuntary Retirement

Involuntary retirement occurs when an individual is no longer able to participate in the workforce. This can occur either at the same place of employment within the employee’s restrictions on their abilities, or if they cannot find comparable work elsewhere. Involuntary retirement is often designated when an employee can show that their injury, commonly a permanent disability, has led to retirement. In these cases, workers comp' benefits will continue for the remainder of an individual’s life. 

Since there are many financial consequences of choosing when to retire, it’s important to speak with a workers’ compensation attorney and an independent insurance agent to fully understand which rights you have in your particular state. 

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Do workers' comp benefits affect Social Security benefits?

If you are receiving retirement benefits, such as a pension, that income does offset your workers' compensation benefits through the employer where you suffered the injury. 

Suppose that you began receiving pension payments from your previous employer at age 65, but you are still working. If you have a work-related injury, and your workers' comp benefit is calculated at $1,750 per month, your monthly pension check will be subtracted from that amount. If you receive $750, your workers’ compensation will be offset by that amount, lowering your monthly benefit to only $1,000.

The same offset is applied for Social Security benefits, which are designed to provide income for retired workers. If you start receiving Social Security after you received your work-related injury/illness, your workers’ compensation benefits will decrease based on 50% of your Social Security benefits. So if you’re receiving $1,000 from Social Security and $1,750 from workers’  compensation, your workers' comp will only be $1,250 ($1,750 minus $500).

How can an independent insurance agent help my retirement?

In order to have a successful retirement with minimal complications, consulting an independent insurance agent can help you devise the most efficient and fruitful strategy for you and your family.

Most financial professionals agree that planning for retirement should occur years before exiting the workforce, when you’re able to make the best decisions and take advantage of opportunities that you may have. Independent insurance agents can help you consider various financial vehicles and insurance products that are designed to provide for your family and future.

You may want to discuss what type of survivor benefits can be added to a life insurance policy with your independent insurance agent. Or you may want to explore various types of annuities that can provide you with regular income to maintain a robust standard of living in your golden years.

Whatever your needs, an independent insurance agent can help you create an actionable plan that ensures a comfortable and worry-free retirement.