If finalized, a new proposed rule could cement a fundamental shift in how disability benefits are determined and push older adults toward relying on retirement assets well before they intended. Meanwhile, advisors might have to prepare clients for the possibility that

disability coverage through Social Security may no longer be the safety net it once was. The rule would alter the way job descriptions and age are factored into Social Security Disability Insurance( SSDI) and Supplemental Security Income( SSI). Those changes would reduce eligibility for disability benefits, particularly among older adults, and shrink the size of the program.

Social Security Disability Insurance is a benefit calculated from a beneficiary’ s past earnings, while Supplemental Security Income is a needs-based public assistance benefit not paid by the Social Security trust funds.

The potential impact of the changes is immense, wrote Jack Smalligan, a senior policy fellow at the Urban Institute, in his analysis. The Social Security Administration is“ preparing a rule that could reshape how eligibility is determined for SSDI and SSI. Many denied older workers may turn to early retirement benefits— cutting lifetime retirement income by up to 30 %.”

Smalligan estimates that even a 10 % reduction in Social Security Disability Insurance eligibility would strip benefits from roughly 500,000 people over the next decade, including 80,000 widows and children. Another 250,000 would lose access for part of that

period. That adds up to about $ 82 billion in forgone benefits— and the losses could be steeper if the final rule is more restrictive.

The proposal is not entirely new. The Trump administration first advanced the idea of tightening job and age criteria for disability benefits during Donald Trump’ s first term. While the Social Security Administration has not released the specifics, Smalligan wrote that the final decision could come before year’ s end.

The debate centers on whether the agency should rely on updated job classifications and functional requirements when assessing applicants’ ability to work, and on whether age should continue to weigh heavily in those decisions.

Currently, the agency acknowledges that older workers have more difficulty adapting to new roles after losing their jobs. Removing or reducing that consideration would disproportionately affect applicants over 50.

“ People who are denied in their 50s have a low rate of returning to work,” Smalligan wrote.“ Those who are denied disability would need to draw down their retirement savings, then apply for Social Security at the earliest age of 62. As a result, they would get a lower monthly benefit than if they were able to wait until their full retirement age.”

The agency’ s own numbers show claim approval rates already trending down. Even though initial decisions climbed by 150,000 this fiscal year, approvals have remained flat at about 812,000. The average approval rate dropped from 38.6 % to 36 %, Smalligan noted.

“ The [ Social Security Administration ] has taken credit for a substantial drop in the Social Security disability claims backlog,” he wrote.“ But there are concerning factors, including fewer new applications and more denials.”

It doesn’ t help that the administration is working with a shrinking staff.

The Urban Institute report warns the consequences could ripple far beyond denied claims. Evidence from previous applicants shows that many who lose access to disability benefits do not return to work. Instead, they often experience worsening health and financial instability, with increased risks of poverty and even mortality.

As a result of the changes, people in their 50s( perhaps advisory clients) who are denied Social Security Disability Insurance could be forced into early retirement, which would shrink their lifetime Social Security payouts and force them to draw down personal savings earlier than planned. That raises financial planning risks, especially for households without significant retirement cushions.

The Social Security Administration did not respond to a request for comment.

— Tracey Longo

10 | FINANCIAL ADVISOR MAGAZINE | NOVEMBER 2025 WWW. FA-MAG. COM