Understanding and Calculating Social Security Disability Benefits

SSDI BenefitsYou may have noticed that recipients of Social Security Disability benefits don’t always get the same amount. The amount of the benefit can in fact vary widely, and many people wonder where Social Security comes up with these different amounts, and what factors go into making that determination.

There are two types of disability benefits. The amount a person receives is determined by eligibility for these benefits.

Type 1 – Social Security Disability Insurance Benefits (SSDI)

If you have worked long enough and earned enough work credits by paying FICA taxes, you are insured for the first type, or Social Security Disability Insurance benefits (SSDI). The amount you receive, if you are found disabled under this benefit, is called the Primary Insurance Amount, or PIA.

The PIA amount is determined generally by how much you have worked over your lifetime and how much money you have earned. In simpler terms, it’s determined by how much FICA tax you have paid over your lifetime. The more you work and earn, the more FICA tax you pay, and the higher your benefit will be.

PIAs range anywhere from just over $200.00 up to the maximum amount, which in 2016 was $2,639.00. The amount of your PIA is related directly to the amount of FICA tax you have paid over your lifetime.

It goes without saying that if you work but don’t file and pay taxes, you are not given credit for the work and will not be insured for SSDI benefits.
Here are some examples of PIA benefits:

  • A  person who earns $30,000-$40,000 per year over the course of many years will likely have a PIA between $1,000.00 and $1,500.00.
  • A person who has worked but earned significantly less, for example, $5,000 per year over the course of many years, will have a PIA of less than $500.00.
  • A person who has worked and earned significantly more, for example, $120,000 per year over the course of many years, will have a PIA over $2,500.00.

Type 2 – Supplemental Security Income (SSI)

The second type of benefit is Supplemental Security Income (SSI). This is a need-based benefit. People who are eligible for this benefit have usually never worked consistently, have only worked sporadically, or have not earned large amounts of money.

The amount of SSI benefit a person can receive is capped, and varies from state to state. In Utah, the maximum SSI benefit a person can receive per month in 2017 is $735 per month. While other states vary slightly, most have a cap around the same amount.

Because SSI benefits are also need-based, Social Security will reduce a monthly benefit if a recipient of SSI benefits has other income coming into their home. This is true whether that income is as a gift, from part-time work, or from other forms of state assistance such as subsidized housing.

Many assets and sources of income are exempt from such reductions, but many are not. It’s best to consult with an experienced attorney to determine whether or not you will qualify for SSI benefits, and what assets or income will result in monthly reductions. An experienced attorney can also help explain further about why there is such variation in disability benefits, and will help to ensure that you receive the highest benefit amount you can.