Whether you are applying for Social Security Disability Insurance (SSDI) benefits or want to make sure you are receiving all SSDI benefits you are entitled to, it is important to know how benefits are calculated. Using an SSDI calculator will help you better understand your situation and the events that can affect your benefits.
Keep in mind that the amount you receive each month is not based on how severe your disability is. When you are approved for SSDI benefits, the amount you receive depends on your average lifetime earnings before your disability began and whether you receive income from other sources. Consider the following information to gain a deeper understanding of how this works.
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How is SSDI Calculated?
On average, SSDI recipients receive between $800 to $1,800 in monthly payments with an average of $1,258 per month, but the actual amount varies from case to case.
The Social Security Administration (SSA) uses a weighted formula to calculate benefits for everyone. The amount of income that you have paid in the form of Social Security taxes is your covered earnings and plays a factor when calculating your disability benefits.
Covered earnings are work-related earnings subject to Social Security taxation and include most types of wages and self-employment income. Over a period of years, the average covered earnings become your average indexed monthly earnings (AIME). The base figure the SSA uses in setting your benefit amount is calculated by applying a formula to your AIME, which is known as the primary insurance amount (PIA).
Calculating Your AIME
To determine your AIME, the SSA considers your highest 35 years of earnings after adjusting for inflation. However, if you do not have 35 years of work history, the SSA calculates the AIME by counting the number of years between the time you turned 21 and the year you became disabled. Then, they subtract one-fifth of that total number of years or five years, whichever is less.
Below is an example of how to determine the number of years included in your AIME:
- If you become disabled at age 43.
- Subtract 43 years minus 21 years, and that would equal 22 years.
- Multiply 22 years by one-fifth, and that would equal 4.4 and round down.
- Subtract 22 years minus 4 years, which would equal 20 years.
- The SSA will use 20 of your highest-earning years to determine your AIME.
Calculating Your PIA And Monthly SSDI Benefit
According to the SSA, the PIA is the sum of three separate percentages of portions of AIME. By law, the percentages of this PIA formula are fixed, but the dollar amounts in the formula change annually with changes in the national average wage index.
These dollar amounts are commonly known as bend points and they control the portions of the AIME:
- Bend Point #1: The SSA will take 90% of these earnings.
- Bend Point #2: The SSA will take 32% of these earnings.
- Bend Point #3: The SSA will take 15% of these earnings.
The bend points help ensure that lower earners receive a higher amount of benefits. You can find the bend points of each year from 1979 to 2020 on the SSA website.
Example Of Calculating Your PIA And Monthly SSDI Benefit
You can use a formula to help calculate your potential SSDI benefits if approved in 2020. In the following example, an applicant’s AIME is $3,500/month. For the year 2020, the dollar amounts in PIA consist of the first bend point being $960 and the second bend point being $5,785.
To calculate the PIA, we would go on to compute the following:
- Bend Point #1: $960 x 90% = $864
- Bend Point #2: ($3,500-$960) x 32% =$812.80
- Bend Point #3: No Bend Point #3 because earnings did not exceed $5,785
- The sum of $864 and $812.80 will be equal to a total of $1,676.80
The final PIA amount is an estimated amount of SSDI benefits that you are entitled to.
Helpful SSA Tools
To find out your entire covered earnings history, you can check your statement online on the SSA website. You can also find helpful resources like an online calculator, which requires you to enter your complete earnings history to estimate your monthly disability benefits.
Additionally, there is a more detailed calculator that is more precise on the approximate estimate of your monthly disability benefits and can compute historical and future benefits estimates.
Although many times the calculator will match the official calculations, it is important to remember that they are not the same calculators used for official calculations and they may display results that are different from an official calculation generated by the SSA.
Your Payment Can Be Reduced By Other Disability Payments
There are rules and programs put in place that make it possible for SSDI beneficiaries to work while receiving payments. However, some of these earnings may affect your benefits. Social Security has work incentive programs that include the following:
- Trial Work Period
- Extended Period of Eligibility
- Expedited Reinstatement
Each of these has different limits on your earnings, time frames, and may contain deduction options. For example, the trial work period consists of nine cumulative months within 60 months, with total monthly earnings of over $910 while continuing to receive your full disability benefits. In the extended period, the SSA gives you a 36-month extended period of eligibility to keep your benefits as long as you do not make more than $1,260 a month.
Receiving additional income from other sources such as disability payments from workers’ compensation and public disability benefits may reduce your benefits. If you are receiving either workers’ compensation or public disability and Social Security Disability benefits, the total amount of these benefits can not exceed 80% of your average earnings before you become disabled.
If the total amount of these benefits exceeds 80%, the excess amount will be deducted from your Social Security benefit. Therefore, it is important to keep the SSA informed of any monthly payment increase or decrease or if you receive a lump-sum payment.
On the other hand, payments from private pensions or insurance benefits do not affect your benefits. Your Social Security benefits will not be reduced if you receive Veterans Administration (VA) benefits, state or local government benefits, or Supplement Security Income (SSI).
Contact Our Office For A Free Case Evaluation
At Crest SSD, Social Security Disability is our primary area of practice. Our team can assist with the confusing parts of the application process. From filing your claim to collecting the medical evidence necessary to using an SSDI calculator to calculate benefits, we’re here to help!
To get a free, no-obligation consultation about your Social Security disability claim, fill out our free disability evaluation form. You will be contacted by one of our helpful representatives who can advise you on SSDI benefits and the best way to go about getting the disability benefits to which you may be entitled.