Medical retirement applies when a person must leave the workforce early due to a long-term or permanent disability. Unlike regular retirement, which typically begins after reaching a certain age, medical retirement can occur at any point in a person’s career. Eligibility rules, benefits and processes vary depending on your profession, employer and health condition. In some cases, it involves federal or state programs; in others, it may come through private benefits or military systems. Understanding how medical retirement works can help clarify what options are available in the event of a health-related career interruption. You may also want to consider working with a financial advisor as you prepare for retirement.
What Is Medical Retirement?
The premise of medical retirement changes slightly depending on its context. The most common use of it applies to military personnel, though. There, it’s a form of compensation for anyone with a military career ended due to a disability. The medical condition must stop you from performing your military duties. A Physical Evaluation Board (PEB) consisting of active-duty physicians reviews your case and decides whether you’re fit to serve.
The medical board may only temporarily retire you if the disability is subject to change, putting you on the temporary disability retirement list (TDRL). After that, the military conducts regular medical reevaluations. Eventually, you’re either permanently medically retired or returned to duty.
Medical Retirement Outside of the Military
But it also exists outside the military. Workers in other areas can also start medical retirement if a disability impedes their ability to work. To qualify, your disability must be long-term and the reason you can’t work. Typically, a doctor must document and confirm your disability and show how it prevents you from working in your or other fields.
Once that’s completed, you can apply for disability retirement. The approval process varies between employers, though. For many, it means applying for Social Security Disability Insurance (SSDI). Federal employees apply through the Civil Service Retirement System (CSRS) or Federal Employees Retirement Service (FERS), depending on their plan.
If you’re an employee of a state, you can apply through that state. For example, if you’re a public school teacher in Texas, you apply through the Teacher Retirement System (TRS) of Texas.
Medical Retirement Benefits
Similar to traditional retirement, there are potential benefits available in medical retirement. Here are the options you should look for:
Social Security Disability Benefits
Some programs offer benefits for short-term or partial disabilities, but Social Security does not. Your medical condition must be long-term to qualify for Social Security disability benefits. Additionally, you must have worked in a job covered by Social Security—most approximately 185 million Americans have a job covered by Social Security in 2025. Essentially, that means you paid into the Social Security system, either through payroll or self-employment taxes.
Generally, this benefit provides a monthly payment to eligible workers. You can start collecting them until you can work again, as “work incentives.” Or, if you receive these benefits at full retirement age, they convert into retirement benefits (at the same amount).
According to the Social Security Administration (SSA), disabled workers and their dependents accounted for 10.5% of total benefits paid in 2024. The average monthly disability benefit in December 2024 was $1,581—nearly $400 less than the average retired worker benefit that same month.
Social Security Disability Insurance is just one type of federal benefit available to people with disabilities. Depending on the number of work credits you’ve earned, your income and disability, you may qualify for Supplemental Security Income (SSI), instead.
Certain limitations and rules apply, however. Check with the SSA’s website to ensure you qualify.
Pension
A medical retirement will not likely affect your pension. However, receiving a pension may alter the amount you receive in monthly disability payments. It depends on the type of pension you have and the disability benefits you receive. Supplemental Security Income has a greater chance of impacting your pension than Social Security Disability Insurance.
Long-term disability benefits (LTD) may take a similar role as a pension plan, since they act as ongoing income. But, your insurance provider may require you to apply for Social Security Disability if you want to collect LTD.
Military Benefits
The Veterans Benefits Administration ensures eligible service members receive benefits. You can open a claim for Veterans Affairs compensation when you participate in the Integrated Disability Evaluation System (IDES). This helps determine your disability benefits. Some may be eligible for vocational rehabilitation and employment (VR&E) services, which help you gain independence and work in your daily life. The VA also provides health care benefits to veterans with conditions related to their military service. It lasts a lifetime for those with disabilities.
Being placed on the Permanent Disability Retired List (PDRL) also entitles you to the full benefits of a military retiree and a monthly retirement check. Severance pay is also available as a one-time lump sum.
What Is Regular Retirement?
Regular retirement is just like how it sounds. It’s what waits for many Americans as they grow older. People work their whole lives and save money; then, they leave the workforce once they hit a certain age.
Based on a Pew Research Center survey from 2024, Americans on average say 61.8 is the optimal age to retire. But the average life expectancy in the U.S. (80.2 for females and 74.8 for males) means you have to have enough savings to carry you into your seventies, at the very least. Retirement benefits can help you cover some daily expenses, making your savings last longer.
Regular Retirement Benefits
Working comes with its rewards. Here are some of the benefits you may qualify for in regular retirement:
Social Security Retirement Benefits
Almost every American includes Social Security as part of their retirement plan, and almost nine out of 10 people over the age of 65 receive Social Security benefits. In addition, many retirees depend on these benefits as a main source of income.
Social Security replaces a portion of your pre-retirement income based on your 35 highest-earning years. It varies according to how much you earn and when you start receiving benefits. On average, beneficiaries receive approximately 40% of their pre-retirement income through this. However, you need to wait until your full retirement age before you can receive your full retirement benefit amount.
Military Retirement Benefits
There are several benefits available for military retirees. If you received an injury or experienced an illness related to your service, you may be entitled to VA disability compensation. This is a tax-free, monthly payment to qualifying veterans. There is a VA pension for veterans with a low income and their survivors as well, which are also monthly payments. However, they are based on financial need.
Service members choose from plans like Final Pay, High-36, REDUX, or the Blended Retirement System (BRS). You can read the breakdown of each on the Military Compensation site for the U.S. Department of Defense.
Generally, your military retirement benefits do not impact your Social Security benefits. You’ll receive those based on your age and earnings like everyone else.
Pension
Pensions are a form of a retirement plan. Essentially, employers promise to pay their employees a regular and defined benefit after they retire. Typically, they calculate the amount as a percentage of the salary you earned in the position. The exact percentage depends on the terms offered by the employer and how long the employee worked. So, you can’t contribute to it like you would with a 401(k) or other retirement plans.
There are two types of pensions: public and private. Government entities on a federal, state or local level distribute public pensions to their workers, i.e., firefighters, teachers and police officers. Private pensions likely come from companies, and they generally have more legal protections.
Medical Retirement vs. Regular Retirement: Distributions
Most people save for retirement to support themselves after they stop working. Individuals with disabilities often rely on these same accounts to replace lost income when they’re forced to leave the workforce early.
Taking money out of retirement accounts before age 59½ usually triggers a 10% early withdrawal penalty, along with regular income taxes on the distribution. These accounts—such as IRAs and 401(k)s—are tax-deferred, so taxes are owed when funds are withdrawn.
However, the IRS waives the 10% early withdrawal penalty for individuals who qualify as totally and permanently disabled. This exemption applies to early distributions from 401(k)s, traditional IRAs, SEPs, SARSEPs and SIMPLE IRAs.
To qualify, the IRS requires that your condition prevents any substantial gainful activity and is either terminal or expected to last indefinitely. The IRS defines disability differently than Social Security, so receiving disability benefits doesn’t automatically exempt you from the early withdrawal penalty.
Bottom Line
Retirement can take different forms depending on a person’s work history, health, and financial circumstances. While some retire after decades in the workforce, others may stop working early due to a serious health condition. Each path comes with its own set of rules, benefits, and potential limitations. Whether the transition is planned or brought on by necessity, understanding the available options can make it easier to manage the years ahead with stability and purpose.
Tips for Retirement Planning
- If you’re unsure where to start, consider speaking with a financial advisor. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- You work to build your retirement savings, but taxes can take a chunk out of them. That’s why it’s worth finding out the tax-friendliest places for retirees. You can see our take on it with the best states to retire for taxes.
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