How does social security calculate disability benefits

Knowing how to calculate your expected Social Security disability payment can help you better budget for your financial future. The process for calculating payments differs depending on whether you are receiving SSDI or SSI benefits.

How SSDI Benefits Are Calculated

If you are applying for Social Security Disability Insurance (SSDI) benefits, your payment will be based on your average earnings before you became disabled. As a form of insurance, payments are higher for those who paid more taxes on their wages before becoming disabled. Your household income or the severity of your disability does not affect your benefit amount. 

Your monthly SSDI benefit is based on your Average Indexed Monthly Earnings (AIME) and Primary Insurance Amount (PIA).

Your AIME is calculated using up to 35 of your working years. The Social Security Administration (SSA) adds together the years with the highest indexed earnings and divides them by the total number of months for those years. Then, the average is rounded down to reach your AIME.

Your PIA is the base amount of your benefits. It is calculated using the total of three fixed percentages of your AIME and bend points that change each year to reflect the national average wage index. You receive 90% of the earnings up to the first bend point, 32% of the earnings up to the second bend point, and 15% of earnings that exceed the third bend point.

In 2020, the average SSDI benefit amount was $1,258 per month. The highest category of earners received payments of $3,011. You can check your own expected payment by visiting the Social Security website. Create an account, then look for your benefits statement. This statement will show your Social Security covered earnings for each year and provide the payment you can expect if your SSDI application is approved.

To encourage recipients to return to work if they feel they are able to do so, the SSA has implemented a Trial Work Period (TWP) of a total of nine months, not necessarily consecutive, over a 60-month period. During these nine months, you can earn an unlimited amount without your benefits being affected.

When you finish your TWP, you will enter the Extended Period of Eligibility (EPE). This is a 36-month period where you can receive your full benefit every month as long as you remain disabled and your earnings are less than the substantial gainful activity (SGA) threshold. The SGA threshold changes each year and is based on the poverty level for a single person. In 2020, the SGA threshold was $1,260 per month.

How SSI Payments Are Calculated

Unlike SSDI, Supplemental Security Income (SSI) is a need-based program. People who have low income, minimal assets, and insufficient work credits for SSDI can apply to receive cash compensation. In some cases, people who receive very low SSDI payments can also receive SSI benefits—which is referred to as a concurrent claim.

SSI payments are calculated based on what is referred to as the Federal Benefit Rate (FBR). For 2020, the FBR is $783 for an eligible individual, $1,175 for an eligible individual with an eligible spouse, and $392 for an essential person. Any countable income you have, such as funds from performing odd jobs, reduces the benefits you receive.

Cost of Living Adjustment for SSDI and SSI

There is an annual cost of living adjustment (COLA) to account for the increased expenses SSDI and SSI recipients face each year. The adjustment is determined by increases in the Consumer Price Index (CPI). As an example, SSDI and SSI recipients received a 1.6% COLA for 2020.

If You Need Help With an Application for Social Security Disability Benefits

SSDI and SSI benefits provide a vital financial lifeline for individuals who are unable to work due to physical or mental disabilities. If you are applying for Social Security disability benefits, you need to speak with an experienced Social Security disability attorney as soon as possible to ensure that your application thoroughly documents your condition and your legal right to benefits. Please contact us online, or call our Virginia Beach office to schedule your free consultation. We have offices throughout Virginia, including Chesapeake, Newport News, Norfolk, and Suffolk.

Related links:

• Why Most SSD Applications Are Initially Denied
• What Your Disability Onset Date Means
• Receiving Both Social Security Disability and Veterans Disability Benefits