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How is Disability Amount Determined?

How is Disability Amount Determined?

How is Disability Amount Determined? Social Security bases your disability insurance benefits (SSDI) on the amount of earnings that you paid taxes on.  Therefore, everyone’s amount is different.  

How are benefits calculated?

Earnings you paid taxes on are called “covered earnings.”  Social Security calls your average covered earnings Average Indexed Monthly Earnings (AIME).   Social Security uses your AIME to figure your Primary Insurance Amount (PIA).  Your PIA determines the amount you would receive from Social Security.  Make sure your Disability Amount Determined is correct.

Average Indexed Monthly Earnings

Social Security adjusts or indexes your lifetime earnings to account for the increase in wages that happened during the years you worked.  Social Security uses up to 35 working years in their calculation.  First, they take the years with the highest indexed earnings and add them together.  Next, they divide them by the total number of months for those years.  Then, Social Security rounds down to reach your AIME which will be used to determine your disability amount. 

Determining AIME for your disability amount

If you don’t have 35 years work history, Social Security calculates your AIME a little differently.  Firstly, they will count the number of years between the time you turned 21 and the year you became disabled.  Secondly, they subtract one-fifth of that total number of years or five years, whichever is less. 

Your Social Security earnings statement

You can also check your estimated benefit amount on your Social Security benefits statement.  Generally, checking your statement is the easiest way to find out your disability amount, which you can do by logging on to Social Security’s website at www.ssa.gov/mystatement.  You would need to set up an account before accessing your statement.  Additionally, you can request your statement from Social Security. You want to make sure your disability amount determined is accurate.

Other disability payments can reduce your disability amount

Social Security will reduce your disability payments if you receive other disability benefits.  For example, these would include worker’s compensation benefits.  They might also include temporary state disability benefits.  Generally, you can’t receive more than 80% of the average amount you earned before you became disabled.  Therefore, if both your Social Security disability benefits and other disability payments are more than 80%, Social Security reduces your disability payments. 

Other disability payments that do not reduce your disability amount

Private long-term disability insurance benefits won’t reduce your Social Security disability amount. VA or SSI benefits won’t reduce your SSDI benefits either. You want to make sure your disability amount determined is accurate.

Disability back pay

Under SSDI, you can receive benefits back to the application date.  However, you can also qualify to receive retroactive benefits.  Social Security pays retroactive benefits for the months between when you became disabled and when you applied for benefits.  Additionally, these benefits can go back one year before the application filing date. Therefore it will be involved in determining your disability amount.

SSDI back pay and the 5 month waiting period

Social Security does not pay back pay for the first five months after your disability began.  This will determine your disability amount. You start receiving benefits at the beginning of the sixth month.  Typically, the 5 month wait period can be much shorter than the time it takes for Social Security to approve your application. 

Cost of living adjustment (COLA) and your disability amount

Each year, Social Security benefits may be increased to adjust to the increasing cost of living.  Generally the Consumer Price Index (CPI) determines any COLA amounts increases each year.  Therefore it will be involved in determining your disability amount.

Determining your disability amount for SSI

Unlike SSDI, SSI is a needs based program and doesn’t depend on your work history.  Therefore, SSI has a maximum monthly rate.  Firstly, the federal SSI payment standard for 2020 is $783 per month.  Secondly, most states provide an additional small supplemental payment.  Thirdly, Social Security calculates your SSI disability amount based on your income, assets and resources.  Fourthly, your SSI benefit can be reduced by wages you or your spouse earn and other resources you receive. You want to make sure your disability amount determined is accurate.

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