How Is Social Security Disability Calculated?

by May 8, 2017

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The Social Security Administration (SSA) maintains two distinct disability benefit programs, Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI), and calculates each benefit differently. In this article, we review the basic formulas the SSA uses when determining benefit amounts for disabled applicants and provide examples to demonstrate how Social Security disability is calculated.

For specific information about your benefits or for help applying for disability, call the Disability Advantage Group at 865-566-0800 for a free consultation.

How are Social Security Disability Insurance benefits calculated?

SSDI is a benefit for disabled workers who have sufficiently paid into the Social Security system over the course of their employment. You must have earned a certain number of work credits to qualify for benefits if you become disabled before retirement age. The exact number of credits you need depends on your age. The older you are, the more credits you need.

Once the SSA confirms that you have enough credits to qualify, it will then calculate how much your monthly benefit should be. The formula that the SSA uses is considerably complex. There are two primary variables that affect your SSDI benefit amount:

Your Average Indexed Monthly Earnings (AIME)

The SSA calculates your AIME by factoring in up to 35 years of your (wage inflation-adjusted) earnings. If you were to reach full retirement age before applying for Social Security benefits, the SSA would take an average of your annual income for your 35 highest earning years to find your AIME.

When you become disabled before retirement age, the SSA realizes that you probably do not have 35 years of work history on your record, so it goes an extra step to determine how many years to use in the AIME calculation. The SSA does this by counting the number of years between the time you turned 21 and the year you became disabled, and then subtracting one-fifth of that total number of years or five years, whichever is less.

Example of Determining the Number of Years to Include in Your AIME:

  • You become disabled at age 40.
  • 40 years – 21 years = 19 years
  • Subtract the lesser of either one-fifth of those 19 years (3.8), rounded down (three years), or five years.
  • So, 19 – 3 = 16 of your highest earning years that the SSA will use to determine your AIME.

Your Primary Insurance Amount (PIA)

PIAs are complex to calculate and even harder to explain. “The PIA is the sum of three separate percentages of portions of average indexed monthly earnings,” states the SSA. Essentially, the SSA separates your AIME into three portions that it calls “bend points”:

  • Bend Point #1: Your first $885. They SSA will take 90 percent of this figure.
  • Bend Point #2: Your earnings between $885 and $5,336. The SSA takes 32 percent of these earnings.
  • Bend Point #3: Your earnings above $5,336. The SSA takes 15 percent of these earnings.

The sum of the three bend points will be your monthly disability benefit amount.

Example of Calculating Your PIA and Monthly SSDI Benefit

  • Let’s say your AIME was $3,800/month.
  • Your PIA would be the sum of $796.5 for Bend Point #1 + $932.80 for Bend Point #2 ($3800-$885). (In this example, there is no Bend Point #3 because your monthly earnings did not exceed $5,336.)
  • You receive a grand total of $1,729/month for SSDI.

How are Supplemental Security Income benefits calculated?

SSI benefits are much simpler to calculate than SSDI. The SSA starts with what is called the Federal Benefit Rate or FBR. The FBR changes periodically to account for inflation and the cost of living. In 2017, the FBR is $735. This is maximum amount of SSI you can collect each month.

Then, the SSA simply deducts your countable unearned income and your countable earned income from the $735 to determine your monthly SSI benefit amount.

The SSA counts various types of income against your benefit amount, including:

  • Wages and other money you earn from working
  • Certain types of payments you receive, such as alimony, child support, or veterans’ benefits
  • In-kind income, which is money family or friends pay towards your housing, food, and other essentials
  • A portion of the income earned by others people in your home, such as your spouse

Not all income counts, though. The SSA ignores various types and sources of income including:

  • Your $20 each month of most income
  • Your first $65 of earned income and one-half of earned income thereafter
  • Food stamp benefits
  • Home energy assistance benefits

Example of SSI Benefit Calculation

  • The SSA starts with $735.
  • The only income you receive each month is $400 from a part-time babysitting job.
  • The SSA ignores the first $65 of that each month, as well as half of the rest. ($400 – $65) x 0.50 = $167.50.
  • So the SSA deducts the remaining $167.50 of your babysitting dollars from $735.
  • You receive a grand total of $567.50 for SSI.

Sound confusing? Call our office for a FREE case evaluation.

Calculating Social Security disability benefits is neither simple nor easy. The formulas and variables are complex and challenging to wrap one’s head around.

Our disability lawyers at the Disability Advantage Group would be glad to help. Social Security disability is our primary area of practice. We handle all types of Social Security benefit cases, including both SSDI and SSI. Our team can assist with all the confusing parts of the application process, including filing your claim, collecting the medical evidence necessary to prove your disability, calculating benefits, and protecting your rights during the process.

And should the SSA wrongly deny your claim, we can help you appeal your case and continue the fight for benefits.

Take the next step to secure the disability benefits you and your family need. Call our office today at 865-566-0800 for a free, no-obligation consultation.