What does Social Security disability insurance pay?

What does Social Security disability insurance pay?

The Social Security Administration runs two separate disability benefit programs, Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI).  Claimants will generally not qualify for both, though it is common to apply for both when filing an application for disability benefits.  Disability Alabama explains how SSDI benefits are calculated below.

SSDI pays more than SSI.

SSDI will generally pay more than SSI. While the maximum monthly benefit an individual can receive on SSI in 2021 is $794, SSDI tops out at a little over $3,000 per month. Most claimants however receive far less than the maximum. The average disability benefit claimants received from SSDI in 2020 was $1,277 per month.

As important is that your SSDI payment will not decrease if you receive other income like pensions and VA benefits. Neither will you lose your SSDI if you have more than a few thousand dollars worth of assets - which typically disqualifies you for SSI.

SSDI relies on your work history.

To calculate the disability benefit of someone on SSDI, Social Security relies heavily on a claimant’s average monthly wage over the course of their working career. Most jobs require that employees pay a tax to Social Security, these are covered wages. Every year that you pay your tax into Social Security you earn credits and Social Security gets a record of your wages.

When it calculates an SSDI benefit, Social Security first looks at average monthly earnings over the course of a career. Essentially, Social Security computes what a claimant has earned, on average.  If there are years the claimant did not work, some of those years can be excluded up to 5 years for older workers.

Social Security “indexes” your past wages.

Unfortunately, $1000 in wages is not the same as $1,000 of wages earned 20 years ago. Because of inflation, $1000 today buys less than it did 20 years ago.  To account for this, Social Security “indexes”  wages. In essence, a multiplier is applied to past monthly wages to compute what an equivalent wage would be today. That calculation does not take into account promotions and other increases in wages not related to inflation.

Once it has an average monthly wage, appropriately indexed for inflation, Social Security then uses what it calls your “Average Indexed Monthly Earnings” or AIME to calculate a monthly disability benefit.

Social Security uses a Progressive Benefit Formula.

The Average Indexed Monthly Earnings is then applied to Social Security’s “Progressive Benefit Formula” to calculate a disability benefit. Under the formula, monthly earnings are multiplied by percentages of:

  • 90% for the first approximately $1,000 of income,
  • 32% for the next approximately $5,000 of income, and
  • 15% for the next approximately $5,000 of income.

Those amounts are then added up to come up with your monthly benefit.

Where to learn more:

  1. By logging into or creating a “My Social Security” account you can get a formal estimate from the Social Security Administration of what your SSDI benefit amount would be.
  2. Use Disability Alabama’s Benefits Calculator for a rough estimation of what your SSDI benefit would be. Calculator NOW AVAILABLE!
  3. If you are in Alabama, contact Disability Alabama for help with your disability application, or appeal.