If you’re applying for social security disability benefits, it’s vital that you know how your benefits are calculated. It will not only help you determine how much you’re going to get but will also help you look for ways to boost your benefit amount.
So how are social security disability benefits calculated?
Unlike workers’ compensation, social security disability benefits don’t depend on the severity of your condition. Rather, it depends on the average income from which you’ve paid social security taxes. Also known as covered earnings, this average income is used by the SSA to calculate your social security disability benefits. Since covered earnings differ for everyone, the benefit amount can also vary for each person.
Aside from your covered earnings, the SSA also takes into account other income earned during the period. This is why SSDI payments tend to change every month. If your income during that month goes way beyond the SSA’s limit, your disability payments will be reduced.
To help you better understand how this works, here’s a quick guide on how social security disability benefits are calculated.
Before we talk about how social security disability benefits are calculated, you first need to figure out whether or not you qualify for Social Security Disability Insurance (SSDI) benefits. In a nutshell, there are only two eligibility requirements for SSDI:
- you must have earned enough work credits
- your medical condition meets the SSA’s definition of disability
Earning Work Credits
Work credits refer to the points you’ve earned from paying social security taxes. To earn this, you must have worked in jobs covered by social security insurance. Each employee can earn up to 4 work credits a year.
Under the new SSA guidelines, credits are now based on your income for the entire year. It doesn’t matter when you started working as long as you earned enough to qualify for credits.
The required yearly earnings to earn a work credit also change each year. In 2021, your covered earnings must be at least $1,470 to earn one work credit. This means that you need at least $5,880 to qualify for the maximum number of credits per year.
For disability benefits, the required number of work credits depends on your age when you became disabled. The standard, however, is 40. Half of which should be earned in the last ten years before your disability.
To check your work credits, simply login to your social security account on the SSA website.
SSA’s Definition of Disability
Unlike other disability benefits, SSA doesn’t pay for partial and temporary disability. Only total disability conditions can qualify for SSDI.
There are three general rules by which the SSA gauges your disability:
- You cannot do the work you did before
- They determined that you cannot adjust to other work because of your medical conditions
- Your disability has lasted or is expected to last for at least a year or will result in death.
In line with these, the SSA will generally consider you disabled if:
- Your average monthly income for 2021 does not exceed $1,310 (this tends to change every year so better check the SSA website for the latest figures)
- Your condition must significantly limit your ability to do basic work such as lifting, standing, and walking, among others. It must also last for at least 12 months.
- Your condition must be in the SSA’s list of disabling conditions
The SSA also considers disability for special situations. This includes those who are blind or have low vision, widow/er, disabled children, and wounded warriors and veterans.
How to Calculate SSDI Benefits
Your average covered earnings for a period of years are referred to as Average Indexed Monthly Earnings (AIME). The SSA applies a formula to your AIME to calculate your Primary Insurance Amount (PIA). The final PIA is the maximum amount of SSDI benefits you are entitled to.
The formula is a complicated table of fixed percentages of different amounts of income. It tends to change every year. For 2022, your PIA is the sum of:
- 90% of the first $1,024 of your AIME
- 32% of your AIME amount over $1,024 to $6,172
- 15% of your AIME amount over $6,172
Sounds confusing? Let’s simplify it.
For example, your AIME is $8,000. Here’s how your PIA is calculated:
90% of $1,024 = $921.60
32% of $5,148 ($6,172 – $1,024) = $1,647.36
15% of $1,828 ($8,000 – $6,172) = $274.20
Total PIA: $2,834.16
This is just a close estimate of your benefits. If you want a more detailed benefit calculation, refer to the SSA’s online calculator. Make sure you’re logged in to your social security account to get a more accurate figure.
If you’re receiving disability benefits well into your retirement, your SSDI benefits will automatically convert into retirement benefits of the same amount.
Calculating Social Security Backpay
As per the SSA’s policy, your disability payments should start on the day you become disabled. But since it takes some time for the SSA to process your claim, you’ll usually receive your benefits after a few months. This is why most disability claims include back payments. It’s the amount you should have received from the start of your disability to the time you actually received the money. In most cases, your back pay will be included in your first disability check.
So how are disability back payments calculated?
Your monthly SSDI benefits determine the amount of your social security back pay. But first, you need to figure out your disability onset date and when your benefits are released. This will determine how many months of back payment you’ll get.
Just add all your SSDI benefits in all the months you’re entitled to a back payment to come up with your social security back pay.
For example, if your disability started on July 1, 2021, and your benefits are released on October 1, 2021, you are entitled to 3 months of back pay. If your monthly SSDI payment is $1,200, then your backpay is $3,600.
Factors That Can Reduce Your SSDI Benefits
As mentioned earlier, the SSA also considers your other sources of income to determine your benefit amount. If you earned more than 80% of your average income before you got disabled, your benefits will be reduced.
Government-regulated disability benefits like workers’ compensation and temporary state disability benefits are considered additional income. Thus, they will be included in your total income for the month.
Disability payments from private insurance policies, SSI, and VA benefits, however, will not form part of your income. As such, they can’t affect your SSDI benefits.
How to Calculate SSI Benefits
Disabled people who don’t have enough work credits for SSDI may still receive disability benefits through Supplemental Security Income (SSI). Unlike SSDI, SSI is a needs-based benefit. This means that SSA only grants it to those with limited income and resources. Though some people may also qualify for SSI even if they’re already receiving SSDI.
Since it’s a needs-based program, your SSI payments will depend on your income. With no countable income, an individual may receive $841 while a couple can receive up to $1,261 in 2022. The SSI maximum amount tends to change per year so please visit this page for the latest figures.
Any countable income will be deducted from your total SSI benefits. Say you won $500 from the lottery. Your SSI payment for that month will only be $341 ($841 – $500).
Your spouse’s income will also affect your SSI benefits. The SSA will deduct half of their income for that month from your SSI payment. So if your spouse is earning $1,200 per month, $600 will be deducted from your total SSI.
Why You Need an Experienced Lawyer
Applying for social security disability benefits might be easy for you. But getting it approved is an altogether different story. A large percentage of first time SSDI applications are denied. This is why you need an experienced social security disability attorney like Victor Malca. He has already helped thousands of injured workers in Florida. He can help you get the benefits you deserve too. Call us now for a free consultation.
VICTOR MALCA LAW – A TRUSTED NAME IN FLORIDA
Victor Malca P.A. has over 25 years of litigation experience in Workers Compensation and Social Security Disability lawsuits. His experience and continued success in fighting for his clients puts among the most trusted workers’ compensation lawyers in Florida. Our area of expertise is in representing injured workers on compensation benefit cases and disabled individuals claim social security disability benefits.
Our unwavering advocacy for employee rights and privileges are recognized by our past clients across South Florida. Book a free consultation today.
ABOUT THE AUTHOR
Judy Ponio is a writer for Victor Malca Law P.A. and enjoys helping people with questions about social security, workers compensation, and other serious matters involving people’s livelihood. She is not an attorney and her writing should not be considered legal advice.