Social Security Disability Insurance
Written by: Bruce L. Weider | 7.26.2023

How Is Your Social Security Disability Calculated?

According to the Center on Budget and Policy Priorities, approximately 8.2 million people currently receive Social Security Disability Insurance (SSDI) benefits. Additionally, 1.4 million children and 104,000 spouses of these recipients receive their own disability benefits. Each of these recipients must have their benefits for Social Security Disability calculated based on specific rules. This calculation process can be confusing for many people. If you have any questions about these calculations, consider contacting an experienced Social Security disability lawyer from Bruce L. Weider, PC for help. You can contact us by calling (734) 485-0535.

Where Do Social Security Disability Payments Come From?

SSDI benefits are primarily financed by the Social Security payroll tax, which employers and employees pay into based on earnings up to the tax cap, which is $142,800 in 2023. These payments go into the SSDI trust fund, from which benefits are doled out to recipients. The SSDI trust fund is a legal entity separate from the larger Social Security retirement fund.

How Much Are SSDI Payments?

The National Council on Aging reports that the maximum benefit amount for SSDI recipients in 2023 is $3,636 per month. However, most people do not receive near this amount. According to the Social Security Administration (SSA), the average monthly benefit for SSDI for disabled workers was $1,485.

How Is Social Security Disability Calculated?

Calculations for Social Security Disability Insurance benefits and retirement benefits use the same approach, according to the SSA. However, this fact does not make it easier for most people to be able to accurately estimate their potential benefits.

Covered Earnings

The SSA uses a variety of critical terms and formulas to calculate your SSDI benefits. Benefits are based on covered earnings, which are those that correspond to work you did for which you paid Social Security taxes. This includes work for others, as well as self-employment. Earnings are only counted up to an annual maximum amount. The annual maximum for 2023 is $160,200. Therefore, for someone who earned more than this, the excess amount would not be counted, but the first $160,200 would.

Indexed Monthly Earnings

Benefits are based on the average of an individual’s covered earnings over a specific period of time, called average indexed monthly earnings (AIME). The SSA determines the individual’s average monthly income during their working life, which is adjusted for historical wage growth. This information is plugged into a formula to determine the person’s primary insurance amount. The primary insurance amount is progressive, meaning that it is weighted so that it gives individuals a higher benefit amount based on years when they earned more money than for other years.

Years Worked

For disability benefit recipients, the AIME is based on the number of years worked and the covered earnings made during those years before the individual became disabled. However, there are adjustments made to these earnings. The SSA adds up all of the years since a benefits recipient turned 22 all the way until the year in which they were considered disabled. SSA calculations then further adjust one to five years, depending on how long an individual has been working. The final number of years represents their highest-earning years to determine the ultimate benefit amount.

SSDI and Retirement

SSDI benefits are not always permanent; if someone makes an unexpected recovery, or if the SSA finds that they are exceeding their maximum allowance of substantial gainful activity (SGA), then the recipient’s benefits eligibility status may be removed. However, a person who is still receiving SSDI when they reach full retirement age will see their SSDI benefits switch to retirement benefits at that point, based on the same amount calculated for SSDI.

Reductions in Social Security Disability Benefits

If an individual receives other types of benefits, their Social Security Disability benefits can be reduced. These reductions are referred to as offsets. Offsets are calculated based on receipt of government-regulated disability payments, such as state disability benefits or workers’ compensation benefits. Disabled veterans’ benefits and long-term disability payments from private insurance do not impact your SSDI benefit amount. However, a government pension can affect your SSDI benefits. For individuals who receive any of the benefits that trigger offset calculations, SSDI benefits are reduced so that they receive 80% of their AIME as the sum of their SSDI payments and other disability benefits.

How Do I Calculate How Much I Would Get on Disability?

Some people are interested in knowing how much they can expect to receive in disability based on their current earnings. Someone who has previously maintained a middle-class standard of living might want to know how much they can expect from SSDI if they were earning $60,000 per year before they became disabled. However, these calculations are complex and rely on sophisticated computer programs. Therefore, the process for calculating benefits leaves many disabled people attempting to navigate the Social Security disability benefits application system bewildered.

To get a better idea about how much you may be qualified to receive in Social Security Disability payments, you can contact the Social Security Administration or reach out to a Social Security Disability lawyer at Bruce L. Weider, PC. The SSA also has an online calculator to better estimate potential benefits that pulls from the personal records entered when you create an account online.

How Is Social Security Disability Calculated for SSI Recipients?

The information above pertains to recipients of SSDI, which is a program based on a person’s work history and payments into the Social Security system. Supplemental Security Insurance (SSI) is a needs-based program that can provide people who have limited income and resources with financial assistance. The maximum benefit amounts and the process to calculate SSI benefits are much different.

For SSI recipients, there is a maximum federal amount that is tied to the cost-of-living. Benefits are based on financial need. In 2023, the maximum federal amount is $914 for an eligible individual or $1,371 for a married couple. Benefits can be reduced if the SSI recipient receives countable income in the month when payments are made. There are also other rules for calculating benefits to others who can receive benefits based off the disabled worker’s work history, such as their spouses and dependent children.

Contact a Michigan Social Security Disability Lawyer for Assistance

If you have wondered, "How is Social Security disability calculated?” consider reaching out to an experienced lawyer with Bruce L. Weider, PC. Our experienced legal team can explain the basics regarding SSDI calculations and assist you to understand the factors the SSA takes into consideration so that you can have a better idea about what you might expect. Call (734) 485-0535 today to schedule a consultation to review your case.

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