The Social Security Disability Insurance (SSDI) program provides financial support to individuals with disabilities who are unable to work. This program is funded by payroll taxes paid by workers and employers. To be eligible for SSDI, you must meet certain medical and work history requirements. Here are some key points about SSDI payments: Based on Earnings History: Your monthly benefit amount is determined by your Average Indexed Monthly Earnings (AIME), which considers your lifetime earnings adjusted for inflation. Not Needs-Based: SSDI is not based on financial need, unlike some other programs. Monthly Payments: If approved, you will receive monthly payments to help with living expenses. The Average Indexed Monthly Earnings is critical in calculating SSDI payments. It represents an average of a worker's monthly earnings, adjusted for inflation throughout their career. To calculate the AIME, the Social Security Administration first identifies the years with the highest earnings over a set number of years. For most workers, this period typically covers 35 years. During the calculation of AIME, past earnings are indexed to the average wage level two years before the worker becomes disabled. This indexing is crucial as it adjusts past earnings to the value of current wages, ensuring that SSDI payments reflect contemporary living standards. These indexed earnings are then divided by the number of months in those years to arrive at the AIME. The Primary Insurance Amount determines the monthly SSDI benefit and is calculated using a formula involving "bend points." These bend points are fixed percentages applied to portions of the AIME. The Social Security Administration annually updates the bend point values to account for wage inflation. In this calculation, the AIME is segmented into three parts. Each segment is multiplied by a different percentage, the bend points. The first portion of the AIME is multiplied by the highest percentage and subsequent portions by progressively lower percentages. Your Primary Insurance Amount is calculated by dividing your Average Indexed Monthly Earnings into three portions. Starting in 2024, the first portion encompasses the initial $1,174 earnings. The second segment includes earnings between $1,174 and $7,078, and the third includes earnings exceeding $7,078. After applying the bend points to the AIME, the results of each segment are added together to compute the PIA. The PIA formula for 2024 determines your monthly SSDI benefit as the sum of the following: 90% of the initial portion ( first $1,174 of AIME) 32% of the middle portion (AIME between $1,174 and $7,078) 15% of the final portion (AIME exceeding $7,078) To illustrate how SSDI payments are calculated for the year 2024, let us consider a hypothetical example: Suppose a worker named Alex has an Average Indexed Monthly Earnings of $3,000. As of 2024, the calculation factors are as follows: 90% of the initial portion (representing the first $1,174 of AIME). 32% of the middle portion (corresponding to any AIME between $1,175 and $7,078). 15% of the final portion (encompassing any AIME exceeding $7,078). Applying these factors to Alex's AIME: Adding these together gives Alex a Primary Insurance Amount (PIA) of $1,640.92. This amount represents the monthly SSDI benefit Alex would be eligible to receive in 2024, subject to any applicable deductions or adjustments. Accumulating more work credits can boost your Social Security Disability benefit . These credits are earned based on your annual income from employment or self-employment, with a maximum of four per year. The number of work credits required for SSDI depends on your age when your disability begins. Typically, 40 credits are needed, with at least 20 earned in the ten years leading up to your disability. However, younger applicants might qualify with fewer credits. Aim for consistent employment and a steady income to maximize your work credits. The more you earn and the longer you work (up to the maximum taxable amount each year), the higher your potential SSDI benefit could be. Another strategy to increase SSDI payments is to focus on earning more during your working years. Since SSDI benefits are calculated based on your earnings history, higher lifetime earnings will result in higher benefits. This can be achieved through career advancement, acquiring higher-paying jobs, or working additional hours if possible. Additionally, consider opportunities for professional development and education that can lead to higher-paying positions. Keep in mind that while earning more can increase SSDI benefits, it is essential to stay within the SSA’s guidelines for disability benefits, which place limits on how much you can earn while receiving SSDI. Benefit recalculation is another way to increase your SSDI payment potentially. You can request a recalculation if you believe your benefit amount does not accurately reflect your earnings history. This might be necessary if all your earnings were not reported or correctly accounted for in your original benefit calculation. To initiate a recalculation, contact the SSA and provide documentation supporting your claim for a higher benefit amount. This could include tax documents, W-2 forms, or pay stubs. SSDI recipients can also use work incentives and trial work periods to increase their income. The SSA’s work incentives allow you to work while receiving SSDI, helping you test your ability to work without immediately losing your benefits. The Trial Work Period (TWP) allows you to work for nine months (not necessarily consecutive) in a rolling 60-month period and still receive full SSDI benefits regardless of your earnings. During the TWP, you can earn more without affecting your SSDI payments. After the TWP, if you continue to have a disabling condition but can work, you might be eligible for the Extended Period of Eligibility, where you can receive benefits for any month your earnings fall below the substantial gainful activity threshold. Social Security Disability Insurance (SSDI) payments provide financial support to individuals who have become disabled and are unable to work. These payments are determined based on the individual’s earnings record and the number of accumulated work credits in the Social Security system. The Average Indexed Monthly Earnings determine SSDI payments. It involves averaging a worker's monthly earnings over their career, adjusted for inflation. This figure forms the basis for calculating the Primary Insurance Amount (PIA), which determines the actual SSDI benefit amount. The Primary Insurance Amount (PIA) is calculated using a formula that applies bend points to the AIME. This calculation ensures that the SSDI payments are proportional to the individual's earnings and contributions to the Social Security system over their working years. Maximizing work credits, earning more during working years, applying for benefit recalculation, and utilizing work incentives and trial work periods can increase SSDI payments. Overview of SSDI Payments
Components of SSDI Payments
Average Indexed Monthly Earnings (AIME)
Primary Insurance Amount (PIA)
Sample SSDI Calculation
How to Increase SSDI Payments
Maximize Work Credits
Earn More
Apply for Benefit Recalculation
Utilize Work Incentives and Trial Work Periods
Conclusion
How to Calculate SSDI Payments FAQs
The payment amount for SSDI is calculated based on the individual's lifetime average earnings covered by Social Security, using the AIME and PIA formulas. This calculation considers the total amount earned and the number of years worked, ensuring a fair assessment based on one's work history.
Increasing your earnings can lead to higher SSDI payments, as benefits are based on your earnings history. Working more or earning a higher income during your working years can positively impact the calculation of your benefits, reflecting the higher contributions made to the Social Security system.
A trial work period allows you to work for nine months while still receiving full SSDI benefits, allowing you to test your ability to work without immediate loss of benefits. This period helps you gauge your capacity to work and can be a stepping stone to re-enter the workforce while still having financial security.
You can request a recalculation of your SSDI benefits if your earnings history was not accurately reflected in the initial calculation. It is important to provide the necessary documentation, such as tax records or W-2 forms, to support your request for a potential benefit increase.
SSDI offers work incentives like the Trial Work Period and Extended Period of Eligibility, which allow you to work and still receive benefits under certain conditions. These incentives encourage SSDI recipients to explore returning to work while providing a safety net during the transition.
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.
To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.
