Calculating Your Benefit Amount
The formula for calculating your Social Security benefits and your Disability benefits is exactly the same right up until the very end. Well get into how it diverges in the next section, but for now, well focus on the shared process.
The first step is calculating your average indexed monthly earnings . The Social Security Administration will take your 35 highest-earning years into consideration. For each of those years, it will index your income for inflation and include it up to the taxable maximum . For tax year 2020, this point is $137,700.
Next, the SSA will add up these totals and divide to get your AIME. If you have more than 35 earning years, your lowest years will be excluded. If you have less, the SSA will include a $0 in the calculation for every year youre short.
The last step is to calculate your primary insurance amount from your AIME. To calculate your PIA, the SSA will take a percentage of three different chunks of your AIME. The exact amount of these portions will differ slightly depending on the year you become disabled or turn 62. If you do either in 2021 the SSA will take 90% of your first $996, 32% of the amount between that and $6,002 and 15% of anything that remains. The total is your PIA.
The Worn Out Worker Rule
In addition to the above grid rules, the “work out worker” rule can be used to approve disability benefits for people whose primary work was physical labor and who have only a marginal education. This rule allows for a quick approval of benefits if the following criteria are met:
- The claimant didn’t go past the 6th grade in school.
- The claimant has worked at least 35 years doing only “arduous unskilled physical labor” .
- The claimant can’t do his or her old job because of his or her impairments.
Claiming Social Security Benefits At The Right Time Means More Money In Your Pocket Here’s A Guide To Everything From Knowing Your Full Retirement Age To Taking Social Security Spousal Benefits
For many Americans, Social Security benefits are the bedrock of retirement income. Maximizing that stream of income is critical to funding your retirement dreams.
The rules for claiming Social Security benefits can be complex, but this guide will help you wade through the details. By educating yourself about Social Security, you can ensure that you claim the maximum amount to which you are entitled.
Here are 12 essential details you need to know.
If You Disagree With The Decision
If you disagree with the decision, you may ask to have the decision reviewed. You must request this review in writing within 90 days of receiving your decision letter.
Your application will be reviewed by Service Canada staff who were not involved in making the original decision on your application.
Why Retirement Scares Social Security Disability Recipients
The biggest concern that those receiving Social Security disability have about reaching full retirement age is that their benefit amounts might go down. The reason has to do with the way that disability and retirement benefits are calculated.
Specifically, in determining how much you receive in disability benefits, Social Security takes a look at your average lifetime earnings during the period before your disability began. It then uses a formula to come up with what’s called the primary insurance amount, which is the base for determining how much you’ll get from Social Security.
In many ways, the calculation of disability benefits closely resembles how Social Security determines retirement benefits. But the big difference is in the length of work history that gets considered. For more retirees, Social Security looks at a 35-year work history, and if you’ve worked less than that, then Social Security fills in the blanks with zeroes. That has the effect of bringing your average earnings down, and it therefore produces a lower primary insurance amount and reduces the benefits you’d receive.
Image source: Social Security Administration.
Obviously, for those who have been disabled for a long time, accumulating a 35-year work history is impossible. Many disability recipients therefore dread the possibility that their Social Security payments will go away or be greatly reduced when they qualify for retirement benefits.
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Timing And Your Health Coverage
Your health insurance coverage can also play a role in deciding when to claim Social Security benefits. Do you have a health savings account to which you would like to keep contributing? If so, note that if youre age 65 or older, then receiving Social Security benefits requires you to sign up for Medicare Part A, and once you sign up for Medicare Part A, youll no longer be allowed to add funds to your HSA.
The SSA also cautions that even if you delay receiving Social Security benefits until after age 65, you might still need to apply for Medicare benefits within three months of turning 65 to avoid paying higher premiums for life for Medicare Part B and Part D. If you are still receiving health insurance from your or your spouses employer, however, then you might not yet have to enroll in Medicare.
On March 17, 2020, all Social Security offices were closed completely due to the COVID-19 pandemic. As of Aug. 5, 2021, they are only open by appointment, and to get an appointment, you need to be in a limited, critical situation. Most people will have to transact their business online, by phone, or through the mail.
Know Whether You’re Eligible
To qualify for Social Security Disability Insurance benefits, you must be unable to work because of a disability or illness that will last for at least one year or end in your death. You must also have earned at least 40 work credits, with at least 20 credits earned in the 10 years before your disability began. The amount of money you must earn for each credit changes from one year to the next, and you can earn up to four work credits each year you work.
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Premiums Increasing With Age
Disability insurance costs more as you get older. Since insurance companies base premiums on a person’s age, occupation and gender, you will pay less in premiums if you apply for disability insurance when you are younger. Women pay more for the same amount of coverage men have because the chance of disabilities increases with age and women live longer. Other factors that can affect the cost of coverage include the status of your health and the amount of coverage you want.
Why It’s Easier To Get Disability After Age 60
For older workers, in particular claimants 60 and older, Social Security must consult a series of tables called the “grids” to decide if a person is disabled. The grids are a set of rules that take into consideration a disability claimant’s age, residual functional capacity , education, and work history to determine whether the claimant should be approved or denied.
The reason claimants over the age of 60 are much more likely to be approved under the grids is because Social Security takes into consideration the fact that it may be harder for older workers to learn new skills and to transition into new workplaces. That said, if you worked at a skilled job before you became disabled and you could put your skills to use at a less demanding type of job, you won’t be approved for disability just because you are older.
Here is what the grids take into account.
Consult With A Disability Attorney
If you are unable to work because of a medical condition and you are 65 or older, you should consult with a disability attorney. You might be eligible for disability benefits, so you wont have to retire earlier than you anticipated. Complete the Free Case Evaluation Form, so you can have your case reviewed by a Social Security disability lawyer right away and your claim can get on the right track!
Claiming Benefits At 66 Can Make A Lot Of Sense If You’ll Hit That Milestone This Year
If you’re turning 66 this year, taking your Social Security now can make a lot of sense, since it’s when the Social Security Administration set your standard retirement age. But if you’ll turn 66 in 2021 or beyond, you may want to think about waiting until you hit your FRA to avoid an early filing penalty.
Ultimately, the choice depends on you. But since your benefits will be important to your retirement security, don’t claim them until you’ve done the research and know how your age when you start benefits will affect your monthly income.
Theres A Social Security Spousal Benefit
Marriage brings couples an advantage when it comes to Social Security. Namely, one spouse can take what’s called a spousal benefit, worth up to 50% of the other spouse’s Social Security benefit. Put simply, if your monthly Social Security benefit is worth $2,000 but your spouse’s own benefit is only worth $500, your spouse can collect a spousal benefit worth $1,000 — bringing in $500 more in income per month. Just as the benefit based on your own work history is reduced if you claim it early, the same is true for a spousal benefit. That 50% figure is the maximum amount that only a spouse who is at least full retirement age is eligible for. Taking the spousal benefit early at, say, age 62, reduces the amount to as little as 32.5% of the higher earners benefit. If you take your own benefit early and then later switch to a spousal benefit, your spousal benefit will still be reduced.
What Do Federal Laws And Regulations Say About Age And Disability
The Social Security Administration discusses age as a vocational factor in disability claims in its regulations and internal policy documents.
Code of Federal Regulations Section 404.1563 states, in part:
We will not consider your ability to adjust to other work on the basis of your age alone. In determining the extent to which age affects a persons ability to adjust to other work, we consider advancing age to be an increasingly limiting factor in the persons ability to make such an adjustment, as we explain in paragraphs through of this section.
Commentary published with the SSAs Medical-Vocational Guidelines, also called the Grid Rules, provides additional insight:
Where age is critical to a decision, recognition is taken of increasing physiological deterioration in the senses, joints, eye-hand coordination, reflexes, thinking processes, etc., which diminish a severely impaired persons aptitude for new learning and adaptation to new jobs.
Put a different way: The Social Security Administration thinks that the younger you are, the more likely it is that you can acquire new job skills, adapt to new work, and compete with other job applicants even though you have a severe medical impairment. And the older you are, the more likely it is that you will have difficulty adjusting to new work, picking up new skills, and competing with other people when you have a severe medical impairment or combination of impairments.
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Different Social Security Disability Rules Apply When You Reach Ages 50 55 And 60 Learn How To Use Them To Win Your Claim And Get Approved For Ssdi Or Ssi Benefits
Your age is a big factor in determining if you win your disability claim and get approved for monthly payments, especially if you are unable to work because of an injury on the job or degenerative condition, such as arthritis.
To understand why your age is so important, lets first look at the evaluation process used by the Social Security Administration when deciding claims.
Here is how it works:
If you have a medical condition that affects your ability to work, but that is not severe enough to meet or equal a condition on the Listing of Impairments, then the SSA will decide what you are capable of doing. This determination, which details both your physical and mental capabilities, is called your residual functional capacity, or RFC.
The SSA will then compare your RFC to the physical and mental requirements of all work that you did in the 15 years before you applied for Social Security Disability benefits.
If the SSA finds you can return to that prior work based on your RFC, then your case will be denied. But if it finds you cannot, then it will consider the vocational factors your age, level of education, and work experience to determine if you can do any other work. If you cannot, then the SSA will approve your disability claim.
Children Can Collect Social Security Benefits Too
Minor children of Social Security beneficiaries can be eligible for benefits. Children up to age 18 and disabled children older than 18 may be able to receive up to half of a parent’s Social Security benefit. The disability must have occurred before the age of 22. As long as the disability prevents the person from working, the adult child can continue collecting the benefit even after the parent has died.
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Ssdi May Convert To Retirement Benefits At Age 65 66 Or 67
Only people born before 1937 receive full Social Security retirement benefits upon turning 65. The rest of us will have to wait a little longer, and that includes people who receive Social Security disability benefits.
People born in 1955 must wait until they are 66 years and 2 months old before they reach full retirement age and their conversion from Social Security disability to retirement benefits will take effect.
The rest of the breakdown of how old you must be to reach Social Securitys full retirement age according to your year of birth is as follows:
- Born in 1956 – 66 years, 4 months
- 1957 – 66 years, 6 months
- 1958 – 66 years, 8 months
- 1959 – 66 years, 10 months
- 1960 and later – 67 years
What Happens If You Claim After Your Fra
If you wait until youre age 70 to start claiming benefits, then youll get an extra 8% per yearor, in total, 132% of your primary insurance amount for the rest of your life. Claiming after you turn 70 doesnt increase your benefits further, so theres no reason to wait longer than that.
The longer you can afford to wait after age 62 , the larger your monthly benefit will be. Nevertheless, delaying benefits doesnt necessarily mean that youll come out ahead overall. You also need to weigh in some other factors, including your expected longevity and whether you plan to file for spousal benefits. You will also need to consider the tax, investment opportunity, and health coverage implications.
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Auxiliary Benefits For Spouses
Auxiliary, or spousal, benefits can be as much as half of the primary workers benefit amount, depending on the age of the spouse when they retire. A spouse can choose to retire as early as age 62, but the benefit amount will be reduced .
The benefit amount can be reduced by a certain percentage for each month before you reach full retirement age. If the spouse is eligible for their own retirement benefits, they are paid either the retirement benefit or the spousal benefit, whichever is greater.
Social Security Disability Rules If You Are Age 60 Or Older
If you are in the 60-64 age range, then you may qualify for SSDI or SSI if:
- You are limited to no more than light work and do not have specific skills that transfer to other skilled or semiskilled light work that is similar to your past jobs.
- You are capable of medium work but have limited education and no work history or a history of unskilled work.
Here is how the SSA defines these terms:
- A job is similar to your past work if it uses the same types of tools and work processes, and is in the same work setting or industry.
- Light work is defined as a job that involves lifting no more than 20 pounds at a time with frequent lifting or carrying of items weighing up to 10 pounds. A job is also considered light if it requires a lot of walking or standing, or it it involves sitting with frequent pushing and pulling of arm or leg controls.
- Medium work is work that requires you to stand and walk for up to 6 hours in an 8 hour day and to lift or carry 50 lbs occasionally and 25 lbs frequently.
- Unskilled work is work that requires little or no judgment, can be learned in 30 days or less, and is completed with just a few steps.
- Semiskilled work is work that requires you to have some skills but not to perform complex work duties. You may have to stay alert and pay close attention, or even inspect goods and other items. You may also have to move your feet quickly to perform repetitive tasks.
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Find Out How To Save On Your Medicare Costs
Reaching retirement age means that you may also be considering your Medicare coverage options.
Medicare can be confusing, and depending on where you live, there may be a number of different Medicare Advantage and Medicare Part D prescription drug plans available in your area.
Compare Medicare plans in your area
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About the author
Christian Worstell is a licensed insurance agent and a Senior Staff Writer for MedicareAdvantage.com. He is passionate about helping people navigate the complexities of Medicare and understand their coverage options.
His work has been featured in outlets such as Vox, MSN, and The Washington Post, and he is a frequent contributor to health care and finance blogs.
Christian is a graduate of Shippensburg University with a bachelors degree in journalism. He currently lives in Raleigh, NC.
Where you’ve seen coverage of Christian’s research and reports:
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