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What Is the Formula for Calculating Social Security SSDI Benefits?

In applying for Social Security Disability Insurance (SSDI), many applicants are concerned about how much their monthly payment will be if they meet the eligibility requirements. Anyone on a fixed income who can’t work due to a disability needs this information to ensure sufficient income to survive. Determining the amount is complex and depends on your unique work experience and contributions to Social Security or FICA during your employment. The severity of a disability is not a consideration when calculating the amount of SSDI benefits.

How can I get a basic idea?

The Social Security Administration’s (SSA) online Benefits Calculator is one of the best tools to use when planning for the future and understanding your financial benefits amounts. It begins with creating a my Social Security account, which is secure, free, and provides personalized tools that allow you to estimate future benefits or manage those you already receive.

Once you log into your personal Social Security account, you will have access to your official earnings records in the SSA database. It’s possible to answer a series of questions that prove your identity rather than creating a personal account; however, the process is more direct when you create an individual Social Security online account. There is a general calculator for disability and survivor benefits and a more detailed version to install on your computer to get a more precise estimate.

The formal process

The SSA uses your official earnings records to determine your SSDI benefits amount. The calculation is based on your lifetime average covered earnings before you became disabled. In this case, “covered” means the earnings at your jobs where your employer deducted money from your wages to pay into Social Security or FICA on your W2 statement and tax filings.

Suppose you are self-employed using Form 1040 or an independent contractor with Form 1099 earnings. That income will determine the SSDI benefit amount because you will have paid into the system through self-employment taxes (whether owner/employer/contract employee) on your net profit. Essentially 1040 and 1099 income will be used in SSDI calculations like your W2 earnings as long as you paid your taxes. Having paid into the system, you are considered an insured worker.

Earnings are indexed by computing an insured worker’s benefit, an SSDI eligibility requirement. Your SSDI calculation for monthly benefits uses this average covered earnings over time, known as your average indexed monthly earnings (AIME). The SSA formulary uses these amounts to determine your primary insurance amount (PIA). This PIA is the benefit amount (before rounding down to the next lower whole dollar) a person receives at normal retirement age.

There are PIA formula bend points. These are the respective percentages of portions of averaged indexed monthly earnings contingent on the year a worker turns 62, becomes disabled before 62, or dies before 62. A Social Security disability lawyer or personal injury lawyer understands how the SSA calculates SSDI benefits and can be very helpful in explaining the complex rules and formulations used to determine the dollar amount of your benefits.

What is the average payment?

According to AARP, in 2023, the SSA 8.7% COLA increase bumps the average monthly SSDI benefit by $119. The average monthly benefit will increase from $1,364 to $1,483, helping to offset inflationary pressures. The SSA online benefits calculator, available through your my Social Security account, will help you personalize your benefit amount using your official earnings records.

Suppose you are one of the 1.25 million family members receiving SSDI via the earnings record of a disabled spouse, former spouse, or parent. In that case, the average monthly benefit will also increase because of the 8.7% COLA. Again, the SSA online benefits calculator allows you to plug in the numbers and get a general idea of the uptick in SSDI benefits amount.

What will reduce my SSDI benefit?

If you currently receive other government benefits, it may reduce your SSDI benefit amount. Certain sources of income can affect your payment, including:

  • Public disability benefits
  • Worker’s compensation
  • A pension via employment not covered by Social Security, like a government or foreign government pension

Retroactive payments

Filing a claim to receive SSDI can be a lengthy process. Once the SSA approves your application and calculates your monthly benefit, you may be eligible to receive a back pay award. The back pay date depends on the day you applied for benefits and the date of your disability onset as determined by the SSA.

There is a lot in play and at stake when applying for SSDI benefits and assessing your monthly payment. Getting a general idea using the SSA online benefits calculator is a good start, but nothing will replace the skills of a Social Security disability attorney or a personal injury lawyer. They can ensure your application is correct and complete, streamlining approval and helping you receive the benefits you deserve.

We hope you found this article helpful. If you would like to discuss your particular situation, please contact our New York office or call us at 607-271-9270.

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