SSDI benefits are a form of regular payments for adults who are unable to work due to a long-term mental or physical illness or disability. To receive these payments, you have to apply for them and provide details about your health and employment background.
Rather than being solely based on your financial needs or the degree of your disability, these payments are largely based on the amount of money you paid into the Social Security system when you worked. If a health condition is impacting your ability to work — and is expected to for the future — here’s what you need to know about calculating SSDI benefits.
SSDI is an acronym that stands for Social Security Disability Insurance. This is a form of monthly government benefits that the Social Security Administration (SSA) manages. Although the official name is SSDI, people often commonly refer to this type of benefit as “disability benefits” when discussing the payments in everyday conversations.
People who receive SSDI benefits get a payment from the SSA each month. This check is intended to replace the income that you no longer earn when you become unable to work due to your disability or illness, usually before retirement age. This benefit is only available to people who have worked and have paid into the Social Security system through income tax withholdings. The benefit that you receive is based on the amount of money you contributed to the Social Security system during your working years.
How Do SSDI Benefits Work?
To start receiving SSDI benefits, you need to fill out an application and submit it to the SSA. You can apply in person at your local Social Security office. It’s also an option to complete your application online or complete it verbally over the phone.
Approval for SSDI benefits is based on two conditions. The first condition is that you’ve been employed in the past and made contributions to Social Security. This means that you were an employee of a business that forwarded withholdings to the SSA, and you made enough on each of your paychecks that your employer could make a deduction for Social Security on them. You could also meet this requirement if you were self-employed and you forwarded your own income withholdings for Social Security to the SSA.
The second condition is that you have a diagnosed illness that fits the SSA’s definition of a disability. The SSA describes a disability as a long-term health issue, usually lasting more than one year, that prevents you from doing your former job and leaves you unable to do another job. For example, an individual who loses a leg may not be able to return to truck driving until fitted with a prosthesis, but this person may be able to do an office-based job in the meantime and wouldn’t qualify for SSDI payments. In addition to these broad standards, the SSA also publishes a complete list of medical conditions that meet its definition of disability.
People who meet these two conditions and complete the application process will receive an eligibility determination decision via a letter from the SSA. If you’re approved, the letter will also explain how much in monthly benefits you’re eligible to receive. If the SSA denies your initial application for SSDI benefits, you have 60 days to appeal the decision.
How Are SSDI Benefits Calculated?
Covered earnings that count towards SSDI eligibility include any income on which you paid Social Security taxes. These are the deductions from your paychecks that were paid into the Social Security system. They’re also the first part of the calculation for your SSDI benefit amount.
The next part of the calculation finds your average monthly earnings. This figure counts all of your covered earnings from the year you turned 22, and it excludes up to five of your lowest-earning years, depending on how long you worked before becoming disabled. That number is then multiplied by an index that accounts for your age and inflation, and the answer is your indexed monthly earnings.
Finally, your primary insurance amount calculates the actual benefit check you’ll receive each month. Your primary insurance amount is a number that the SSA uses both for calculating SSDI and for calculating Social Security benefits at retirement.
Primary insurance is calculated based on a progressive scale. You get 90% of the first $1,024 worth of SSDI benefits you’re eligible for, but the percentage drops as you cross incremental thresholds. In other words, people who earned less before becoming disabled get a higher percentage of the monthly benefit they’re eligible for. People who earned more before becoming disabled get a lower percentage of the monthly benefit they’re eligible for.
How Is SSDI Backpay Calculated?
There are several moving parts to an application for SSDI, and the SSA can take a long time to process them. The timeline extends even more if your first application is denied and you file an appeal. Some people hire disability lawyers to manage the appeal process. Because there’s often a significant delay between applying for benefits and receiving them, the SSA allows eligible recipients to get SSDI backpay.
You may be eligible for backpay if the time period between applying for SSDI benefits and receiving your approval letter from the SSA took longer than five months. If so, you can receive a lump sum payment of your monthly benefit amount for every month you waited over five months. Suppose it took one year between the time you applied and the time you were approved. Your approval letter says that you’ll receive $1,000 per month in SSDI benefits. Five of the 12 months you waited don’t count towards backpay, so you can receive a $7,000 (seven months x $1,000 monthly benefit) lump sum payment as back pay for the additional seven months you waited. SSDI benefits are an important resource for adults who are unable to work due to long-term disabilities. If you need help applying for or understanding benefits, representatives from your local Social Security office may be able to help you or connect you with the right community resources.