Determining what amount of Social Security disability benefits you are eligible to receive can be difficult. Understanding the basics can demystify the process.
Unlike other financial assistance programs, Social Security disability benefits are calculated based on your earnings history, not financial need. Here’s an overview of the factors that influence disability benefit amounts and what you can expect if you qualify.
How are Social Security Disability Benefits Calculated?
The Social Security Administration (SSA) uses a specific formula to calculate disability benefits, largely based on your Average Indexed Monthly Earnings (AIME) and Primary Insurance Amount (PIA):
- Average Indexed Monthly Earnings (AIME): The SSA looks at up to 35 of your highest-earning years and adjusts them for inflation to calculate your average monthly earnings. This average determines your AIME, which serves as the foundation for calculating your benefits.
- Primary Insurance Amount (PIA): Using your AIME, the SSA then applies a formula to calculate your PIA. This is the base amount of your monthly benefit. It reflects a percentage of your earnings history. In essence, the more you’ve paid into Social Security through taxes, the higher your benefit may be, up to the maximum limit set each year.
What Role Do Work Credits Play?
To qualify for disability benefits, you need to have accumulated enough work credits. Work credits are earned based on your yearly income, and you can earn up to four credits per year.
Generally, you need 40 work credits, with at least 20 earned in the past 10 years, to be eligible for benefits. However, younger workers may qualify with fewer credits due to shorter work histories.
How Does Your Age Affect Your Disability Benefits?
Your age when you become disabled can influence your benefit amount. For instance, those who become disabled earlier in their careers may have lower AIME figures simply due to a shorter work history. The SSA accounts for this by averaging earnings over fewer years, which helps ensure that younger workers still receive fair benefits despite fewer years in the workforce.
When Can Dependents Qualify For Additional Benefits?
In certain cases, disability benefits can extend to family members, such as a spouse or dependent children. Known as auxiliary benefits, these additional payments can help provide for family members who rely on your income. Each eligible family member may receive up to 50% of your disability benefit, though a maximum family limit applies to keep total family benefits within SSA guidelines.
What Is The Cost-Of-Living Adjustment (Cola)?
Social Security disability benefits are generally adjusted annually based on the COLA, which is calculated to keep pace with inflation. Each year, the SSA may increase benefit amounts to help beneficiaries maintain purchasing power as the cost of goods and services rises.
The COLA is determined by the Consumer Price Index (CPI). Any increases take effect in January.
What Are The Maximum Disability Benefit Limits?
Although the SSA uses AIME and PIA to calculate disability benefits, there is a cap on the maximum amount you can receive.
The maximum benefit amount can vary yearly, as it’s tied to wage growth across the economy. While relatively few beneficiaries receive the maximum, this limit ensures consistency in benefits distribution.
How Does Income From Other Benefits Affect Social Security Disability?
Receiving other types of income, such as workers’ compensation or other public disability benefits, can sometimes reduce your Social Security disability benefit. Known as the benefits offset rule, this reduction applies if your combined disability benefits and other disability payments exceed 80% of your average earnings before becoming disabled. However, private disability insurance and income from retirement plans typically do not impact your Social Security disability benefit amount.
How Are Medicare And Disability Benefits Linked?
After receiving disability benefits for 24 months, you become eligible for Medicare coverage, regardless of your age. While Medicare coverage does not directly affect your disability benefit amount, it is a crucial part of the Social Security disability program. This health coverage can help manage medical costs associated with your disability, providing additional financial stability.
Get In Touch For Help With Disability Benefits
If you’re preparing to apply for Social Security disability benefits or want more information about maximizing your benefits, an experienced disability attorney at Hunter | Everage can help clarify your options and guide you through the process. Contact our disability attorneys in Richmond, Virginia today.