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How Are Social Security Benefits Calculated?

Social Security Disability Insurance (SSDI) is a government program that provides benefits to individuals who are unable to work due to a disability. The amount of disability benefits a person can receive is calculated based on a variety of factors, including their work history, earnings history and medical condition.

But First, Qualification

To qualify for SSDI benefits, you must have worked long enough and recently enough to earn sufficient Social Security credits. The number of credits required to qualify for disability benefits depends on your age at the time you become disabled. Typically, a person must have earned at least 20 credits in the 10 years prior to becoming disabled.

Once you have established eligibility for SSDI benefits, the amount of your monthly benefit is calculated based on your average lifetime earnings. The Social Security Administration (SSA) calculates a person's average lifetime earnings by taking the highest 35 years of their earnings history and adjusting those earnings for inflation. If you have not worked for 35 years, then zeros are added to your earnings history for the years you did not work.

After the average lifetime earnings have been calculated, the SSA applies a formula to determine your primary insurance amount (PIA), which is the number of monthly benefits you are eligible to receive. The formula is based on a weighted average of your earnings history, with more weight given to earnings in the early years of your career.

Please note: there have been recent changes to the Social Security Disability application. Read about the updates and see how they may impact you here.

Calculating PIA in 2023

According to the SSA, the formulation to determine PIA is as follows:

  • 90% of the first $1,314 of average monthly earnings
  • 32% of the next $4,246 of average monthly earnings
  • 15% of average monthly earnings over $5,560

The maximum monthly benefit amount for SSDI in 2023 is $3,222, but most people receive less than that. The number of benefits you are eligible to receive can also be reduced if you are receiving other forms of income, such as workers' compensation or other income.

About SSDI Benefits

In addition to the formula used to calculate the PIA, the SSA also uses a "family maximum" rule to limit the total amount of benefits that can be paid to a person with a disability’s family members. This rule ensures that the total amount of benefits paid to a family does not exceed a certain percentage of the person with a disability’s PIA. The family maximum varies depending on the person's PIA and the number of family members who are eligible for benefits.

SSDI benefits are taxable if a person's total income exceeds a certain threshold. For individuals, benefits are taxable if their total income exceeds $25,000. For married couples filing jointly, benefits are taxable if their total income exceeds $32,000. Tax implications vary based on several factors. It is important to speak to a tax professional about whether your benefits would be taxable or not.

The amount of SSDI benefits you are eligible to receive is based on a variety of factors, including work history, earnings history and medical condition—and the application process can be challenging to navigate on your own. Application of the formula to calculate benefits, which considers your average lifetime earnings, is complicated. If you have any questions about SSDI and whether you qualify, talk to a trusted legal professional. That’s why Black & Jones Attorneys at Law fight for you when you can’t go it alone. Contact us to start your free legal consultation today.