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How Do You Calculate Social Security Disability

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How Inflation Impacts Your Pia

How Social Security Disability is Calculated

Your PIA is calculated at age 62. If you wait beyond age 62, cost-of-living adjustments will be applied to your PIA for each year afterward.

If you have already had most of your 35 years of earnings, and you are near age 62 today, the age 70 benefit amount you see on your Social Security statement will likely be higher due to these cos- of-living adjustments. Many people do not account for this when doing their own calculations, which can lead them to think that taking Social Security early is a better deal, when waiting is often the better deal.

In the table below, our hypothetical worker, born in 1954, is eligible for full retirement at age 66. The column on the right shows the effect of inflation for waiting beyond age 62 to take their benefits.

Effect of Age on Claiming Benefits

Reducing Cost Of Living Adjustment

At present, a retiree’s benefit is annually adjusted for inflation to reflect changes in the consumer price index. Some economists argue that the consumer price index overestimates price increases in the economy and therefore is not a suitable metric for adjusting benefits, while others argue that the CPI underestimates the effect of inflation on what retired people actually need to buy to live.

In 2003 economics researchers Hobijn and Lagakos estimated that the social security trust fund would run out of money in 40 years using CPI-W and in 35 years using CPI-E.

What Is Supplemental Security Income

SSI is a program administered by the Social Security Administration that provides monthly cash payments to low-income elderly or disabled individuals, including blind or disabled children. In addition, to be eligible for SSI the individual must have very few assets. For children on SSI, the Social Security Administration reduces the childs SSI benefit by two-thirds of the amount that is paid in child support.

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How Are Fers Disability Retirement Benefits Calculated

Under the regular federal retirement benefit system, the basic annuity formula is based on age at retirement and years of service. If you retire under age 62 or at age 62 or older with less than 20 years of service, benefits are based on 1% of your high-3 average salary for each year of service. If you retire at age 62 or older with more than 20 years of service then benefits are based on 1.1% of your high-3 average salary for each year of service. However, the amount you can receive in federal disability retirement benefits can depend on your age and the years of service you have when you retire.

Here are some examples of how FERS disability benefits can be calculated.

Scenario #1: Youre age 62 or older at retirement and meet age and service requirements for voluntary retirement.

  • If youre 62 or older with less than 20 years of service you receive 1% of your high-3 average salary for each year of service
  • If youre 62 or older with 20 or more years of service you receive 1.1% of your high-3 average salary for each year of service

High-3 refers to the average of your salary for the three consecutive years where you earned the most. Typically, these are the final years of service but it can be any three consecutive years in which you had the highest earnings.

Scenario #2: Youre under age 62 at retirement and not eligible for immediate voluntary retirement

How Much Disability Can You Get Deciding Factors

Top 6 Best Social Security Calculators

As weve been exploring throughout this article, disability awards can vary dramatically from one claimant to the next. Even with calculators at your disposal, its still difficult to determine exactly how much you could ultimately receive.

This is because many different factors impact how much each claimant is eligible for. So, why do some people receive the absolute maximum, while others wind up getting less than average? Consider the following questions:

  • Are you receiving workers comp or state benefits? If you are, the SSA might pay reduced benefits, treating those other benefits as the primary benefits. Think of the income you were earning before you had your accident. Now, imagine 80% of that number. If your combined SSDI benefits and workers compensation add up to more than 80% of what you used to earn, the SSA will lower your SSDI payment to compensate.
  • Are you filing alone or with a spouse? Married couples are eligible for higher amounts than their single counterparts.
  • How much of your income qualifies? Not all income is counted toward the income amount that the SSA looks at for SSI. The more countable income you earn, the lower your SSI payment will generally be since SSI is need-based.
  • Can you get a state supplement? Pennsylvania and New Jersey both sometimes add state money to the federal SSI payment claimants receive from the SSA.

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Other Income That Could Reduce Your Ssdi Payment

Any disability benefits you receive from a private long-term disability insurance policy won’t affect your SSDI benefits. Nor will SSI or VA benefits impact your SSDI amount. But government-regulated disability benefits, such as workers’ comp or temporary state disability benefits, can affect your SSDI benefits. Here’s how that works: If the amount in SSDI plus the amount from government-regulated disability benefits is more than 80% of the amount you earned before you became disabled, the SSDI or other benefits will be reduced.

Before Inez became disabled, her average earnings were $5,000 per month. Inez, her spouse, and her two children would be eligible to receive a total of $3,000 a month in Social Security disability benefits. But Inez also receives $2,000 a month from workers’ compensation.

The total amount of benefits Inez and her family would receive$5,000is more than 80% of her average earnings. So, her family’s Social Security benefits will be reduced by $1,000, from $3,000 to $2,000. That way, the $2,000 a month from workers’ comp and the $2,000 in disability benefits means they will receive a total of $4,000 per month, which is 80% of the earnings figure of $5,000.

The following types of government benefits could lower your SSDI payment:

  • workers’ comp payments
  • civil service disability benefits, and
  • state or local government retirement benefits based on disability.

Demographic And Revenue Projections

This section’s factual accuracy may be compromised due to out-of-date information. The reason given is: Several of these projected dates have passed, and some language referring to data as ‘current’, ‘latest’, ‘most recent’, etc. is as old as 2005, or undated. Please help update this article to reflect recent events or newly available information.

In 2005, this exhaustion of the OASDI Trust Fund was projected to occur in 2041 by the Social Security Administration or by 2052 by the Congressional Budget Office, CBO. Thereafter, however, the projection for the exhaustion date of this event was moved up slightly after the recession worsened the U.S. economy’s financial picture. The 2011 OASDI Trustees Report stated:

Annual cost exceeded non-interest income in 2010 and is projected to continue to be larger throughout the remainder of the 75-year valuation period. Nevertheless, from 2010 through 2022, total trust fund income, including interest income, is more than is necessary to cover costs, so trust fund assets will continue to grow during that time. Beginning in 2023, trust fund assets will diminish until they become exhausted in 2036. Non-interest income is projected to be sufficient to support expenditures at a level of 77 percent of scheduled benefits after trust fund exhaustion in 2036, and then to decline to 74 percent of scheduled benefits in 2085.

Ways to eliminate the projected shortfall

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Tips For Retirement Planning

  • Consider talking to a financial advisor about the best ways to make the most of the federal retirement benefits you may be eligible for. If you dont have a financial advisor yet, finding one doesnt have to be complicated. With SmartAssets financial advisor matching tool, you can get personalized recommendations for professional advisors in your local area. You just need to answer a few simple questions to get started.
  • One key to successful retirement planning is knowing what your Social Security playments will be. A Social Security calculator can quickly give you a good idea of what your monthly payments will be.

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How Social Security Disability Benefits Are Calculated: The Good Law Group

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How To Calculate Social Security Disability

The Social Security Administration calculates your monthly benefits based on the number of years you have worked and how much income you earned. While most people earn about $1,200 per month, your benefits can be much higher depending on your work history. Our Free Disability Evaluation can help you calculate how much you could receive in Social Security disability benefits each month.

To calculate your Social Security benefits, you will need to know how much you make in a year, then adjust that rate for inflation and cost of living, and then increase or decrease that amount based on when you plan to retire.

The first step to calculating your Social Security benefits is to determine your Average Indexed Monthly Earnings . To do this, take 35 of your highest earning years, adjust the salary from those years for inflation, and add them all together. If you havent worked for 35 years, add in 0s for those years. To find your annual coverage, divide by 35. Finally, divide that total salary sum by 12 to calculate your monthly coverage.

The SSA then uses a complicated formula to determine how much in disability benefits youre entitled to each month. Your disability benefits will be calculated based off of how high your AIME is. Please refer to the table below to see approximate Social Security disability monthly benefits based on your AIME.

Average The Highest 35 Years

The Social Security benefits calculation uses your highest 35 years of earnings to calculate your average monthly earnings. If you do not have 35 years of earnings, a zero will be used in the calculation, which will lower the average. In the table below, the highest 35 years are listed in Column G.

Total the highest 35 years of indexed earnings, and divide this total by 420, which is the number of months in a 35-year work history, to find the Average Indexed Monthly Earnings.

For our example worker, who was born in 1953 and turned 60 in 2013, the highest 35 years of wages total $1,919,040. Divide by 420 to get an AIME of $4,569.

How to Calculate Your AIME for Social Security Benefits

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How To Calculate A Child’s Social Security Disability Benefits

Supplemental Security Income is a federal benefits program that pays monthly amounts to children with qualifying disabilities. At the start of each calendar year, the Social Security Administration determines how much your child receives each month. This amount doesn’t change for the remainder of the year as long as your household income doesn’t change. How much your child receives depends on a fairly complicated formula that includes your household size and total monthly income.

What Happens If You Start Your Cpp After 65

How is the social security disability income amount ...

If you are starting your CPP retirement pension later than age 65, increase your RTR-FBC calculated in Step 5 by the appropriate age factor .

If you delay starting your CPP until after age 65, there is an additional dropout provision, known appropriately enough as the over-65 dropout

Under the over-65 dropout provision, one of two things will happen:

  • First, if you are still working after age 65, you can use these earnings to replace any periods of time under age 65 where you had lower APE.
  • Second, if you are not working after age 65 or if your earnings after age 65 are less than any of your under-age 65 APE, you can simply drop out all periods after age 65 from both your NCM and your APE.

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The Permanent Disability Retired List

Those who are determined to have a medical disability rated at 30% or greater or who have served more than 20 years are placed on the Permanent Disability Retired List. Like those on the Temporary list, these retirees are given the same retirement benefits their non-medically retired colleagues enjoy. For those on the Permanent list, retirement pay is calculated in one of two ways:

  • The disability rating percentage, or Method A
  • Your years of active service, or Method B
  • Those who were transferred from the Temporary list to the Permanent list have their pay recalculated using the most current disability percentage rating

How Ssi Differs From Ssdi

SSI is slightly different from SSDI, although both programs are run by the Social Security Administration. SSI is a cooperative program between your state and the federal government.

Supplemental Security Income is a program that is strictly need-based, according to income and assets, and is funded by general fund taxes. SSI is called a means-tested program, meaning it has nothing to do with work history, but strictly with financial need.

SSI disability benefits are available to low-income individuals who havent earned enough work credits to qualify for SSDI.

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Understanding How The Ssas Complex Benefits Formula Works

Your Social Security disability payment is based on how much you earned during the last 10 years you worked. The SSA averages your highest monthly earnings in the last decade. Then, they adjust that amount to account for this years current inflation rate. This is called your average indexed monthly earnings, or AIME. Then, they apply a complex formula to your AIME to determine your primary insurance amount, or PIA. The SSA uses three fixed percentages called bend points to find your PIA. Whats more, the agency updates these three specific bend points each year.

Heres what that PIA formula looks like in 2021:

  • Take 90% of your first $996 out of the AIME: $896
  • Next, take 32% of your AIME thats more than $996, but less than $6,002.
  • Finally, take 15% of your AIME thats more than $6,002.
  • Add those three dollar amounts together.
  • Then, round that amount up or down to the nearest multiple of $.10.
  • In plain English: Your Social Security disability benefit equals about 40% of your average monthly paychecks, adjusted for current inflation.

    If that sounds unfair to you, its the same formula they use to calculate regular Social Security payments.

    Child Benefit Standard Calculations

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    To calculate standard SSD benefits for a child, the SSA combines the gross monthly incomes of the household’s caregivers. Once combined, $367 is deducted per non-disabled child living in the same household . An additional $85 is then deducted, and the total is divided in half.The federal Supplemental Security Income benefit rate is $733 if the child lives with only one caregiver or $1,100 if the child lives with two caregivers. This benefit rate is subtracted from the new total. The resulting number is the caregivers deemed income, or the total monthly countable income of the disabled child.

    If the child has no other income of his own, another $20 will be deducted from the calculated countable income. The final amount will then be subtracted from the current maximum monthly SSI cap. This cap can change each year based on annual cost of living adjustments. Floridas 2016 cap is set at $733.

    The resulting balance is the amount the child will receive each month from the SSA, if approved.

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    Benefits For A Disabled Child

    A child under age 18 may be disabled, but we don’t need to consider the child’s disability when deciding if he or she qualifies for benefits as a dependent. The child’s benefits normally stop at age 18 unless he or she is a full-time student in an elementary or high school or is disabled.

    Children who were receiving benefits as a minor child on a parents Social Security record may be eligible to continue receiving benefits on that parents record upon reaching age 18 if they are disabled.

    When Can I Apply

    There are no minimum requirements for age or service under VRS disability retirement. You can apply from the first day of employment or within 90 days of your last day of employment. If you are on leave without pay, you have up to 24 consecutive months on leave without pay to apply for disability retirement after 24 months, you are no longer eligible to apply. If you are on active duty military leave, you can apply at any time while on military leave, even if it exceeds 24 months.

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