Why Does Long-Term Disability End at 65?

Long-term disability (LTD) benefits replace a portion of income when an individual cannot work due to a prolonged illness or injury. These benefits commonly cease around age 65, reflecting the design principles of LTD insurance, which account for an individual’s working life, government support programs, and specific contract terms.

The Nature of Long-Term Disability Benefits

Long-term disability (LTD) insurance provides financial support when a severe illness or injury prevents an individual from working for an extended period. These policies are distinct from short-term disability insurance, which covers shorter periods (typically weeks to months). LTD coverage generally begins after short-term benefits end, bridging the gap until an individual can return to work or access other income sources.

LTD coverage is typically offered through employer-sponsored group plans, though individuals can also purchase policies directly. Its primary purpose is to maintain financial stability, helping policyholders cover essential living expenses when their income is significantly reduced or eliminated.

LTD insurance operates as a contractual agreement with defined terms. Policies specify what constitutes a qualifying disability, the percentage of pre-disability income replaced (often 50% to 70%), and the maximum period for which benefits will be paid. This contractual nature establishes a finite duration for benefits, rather than providing lifelong income.

The Role of Normal Retirement Age

The concept of “normal retirement age” (NRA) plays a significant role in LTD policy design. Historically, age 65 served as a common benchmark for transitioning to retirement in the United States, initially established as the standard for unreduced Social Security retirement benefits.

LTD policies are designed to provide income protection during an individual’s typical working years. They are not intended as a permanent retirement income stream. The assumption is that individuals will eventually transition out of the workforce, relying on retirement savings or government benefits as income sources.

While the Social Security Administration’s full retirement age (FRA) has increased for those born after 1937 (reaching age 67 for those born in 1960 or later), many private LTD policies still use age 65 as a common benefit termination point. This influences actuarial calculations and pricing. LTD coverage aims to bridge the gap until an individual would typically retire, rather than providing indefinite support.

Coordination with Government Benefits

Long-term disability benefits frequently coordinate with, or are supplemented by, government programs, particularly Social Security Disability Insurance (SSDI) and Social Security retirement benefits. Most LTD policies include provisions that require claimants to apply for SSDI, which is a federal program for workers who have paid Social Security taxes. If approved for SSDI, the private LTD benefits are typically reduced, or “offset,” by the amount received from Social Security. This offset prevents individuals from receiving duplicate payments for the same income loss and ensures that combined benefits do not exceed a certain percentage of pre-disability earnings.

As an individual approaches or reaches their full retirement age, SSDI benefits automatically convert to Social Security retirement benefits, usually at the same payment amount. Private LTD policies often contain clauses that terminate benefits when a policyholder becomes eligible for Social Security retirement, or they continue with an offset for these retirement benefits. This transition reflects the shift from disability support to standard retirement income.

Medicare eligibility at age 65 further reinforces this transition point, as it provides health insurance coverage for most individuals aged 65 or older, including those with certain disabilities. For those under 65 with a qualifying disability, Medicare eligibility typically begins after 24 months of receiving SSDI benefits.

Policy Specifics and Benefit Duration

The precise duration of long-term disability benefits is explicitly defined within each individual insurance policy contract. These contracts specify a “maximum benefit period,” which is the longest length of time benefits are payable, provided the policyholder remains continuously disabled. Common policy language often states that benefits are payable “to age 65,” “until eligible for full Social Security retirement benefits,” or for a fixed number of years, such as two, five, or ten, whichever comes first.

These contractual clauses are central to the design, actuarial calculations, and pricing of the insurance product. Insurers determine premiums and manage risk based on the anticipated duration of claims, with age 65 frequently serving as a natural termination point for coverage.

If a disability begins closer to the typical retirement age, some policies may have a shortened benefit period, such as 12 to 24 months, rather than extending until age 65. Therefore, reviewing the specific terms of one’s long-term disability policy regarding the “maximum benefit period” is important for understanding the exact limits of coverage.