Our Team Is Here for You CONTACT US TODAY
Social Security card and dollar bills

How Is the Amount for Social Security Disability Calculated?

Apollo Law PLLC June 25, 2024

Unlike other forms of financial support, Social Security Disability (SSD) benefits are determined through specific formulas that take various factors into account.  

If you or a loved one needs support when applying, appealing, or learning more about disability claims, our firm, Apollo Law PLLC, is here to help you through the legal process.   

Key Factors in Calculating SSD Benefits

The Social Security Administration (SSA) uses a specific formula to determine your benefit amount, based on your average lifetime earnings before your disability began. Several key factors influence this calculation: 

  • Average Indexed Monthly Earnings (AIME): This is a figure that represents your average earnings over your working years, adjusted for wage inflation. The SSA takes your highest-earning years to compute your AIME. 

  • Primary Insurance Amount (PIA): Your AIME is then used to calculate your PIA, which is the base amount for your monthly SSD benefits. This is done through a formula that applies different percentages to portions of your AIME. 

Understanding the AIME and PIA Calculation 

The process starts by summarizing your lifetime earnings, adjusted for changes in wage levels over time. The SSA indexes your earnings to reflect changes in average wages since the years they were initially earned.  

Here’s a breakdown of the steps: 

  1. Indexing earnings: Your earnings are indexed to account for wage growth. The process of indexing your earnings is crucial to ensuring that the benefits reflect the current economic environment. The SSA converts your past earnings using the national average wage index. This helps in standardizing the value of your past earnings with the present-dollar value, taking into account inflation and general wage growth over time. For instance, if you earned $40,000 in a year where the average wage was significantly lower, the indexed value of that $40,000 might appear higher in today's terms. This ensures fairness and accuracy in your benefit calculation. 

  1. Selecting highest earning years: Not all years of earnings are treated equally. The SSA looks at the number of years you have worked to determine which years had the highest earnings. These years are then used in the calculation to ensure that the highest possible benefits are computed. For example, if you became disabled at the age of 50 and had been working since age 18, the SSA might consider your top 25 years of earnings to find your AIME. By focusing on the years where you earned the most, the SSA aims to provide you with an amount that reflects your peak earning capacity. 

  1. Calculating AIME: Once your highest-earning years have been selected, these earnings are averaged and then divided by the number of months contained within those years. This monthly average forms your AIME. For instance, if your indexed earnings from your highest 25 years sum up to $1,000,000, the SSA will divide $1,000,000 by the number of months in those 25 years (300), producing an AIME of $3,333.33. This monthly figure is crucial as it directly impacts the calculation of your PIA. 

  1. Determining PIA: The PIA is determined through a three-part formula applied to your AIME. The percentages and thresholds may vary annually, reflecting changes like inflation. Typically, the formula might take 90% of the first segment of your AIME, 32% of the second segment, and 15% of any amount above that. For example, if your AIME is $3,333.33, the PIA calculation might involve taking 90% of the first $1,024, 32% of the amount between $1,024 and $6,172, and 15% of any amount over that threshold. The resulting figure will be your PIA, which serves as the base amount for your monthly SSD benefit. 

Additional Considerations

Certain factors might further affect your SSD benefit amount: 

Cost-of-Living Adjustments (COLA): Once your benefits are initially calculated, they don't remain static over time. To protect against the erosion of benefits due to inflation, the SSA applies cost-of-living adjustments, or COLA, annually. These adjustments ensure that the purchasing power of your SSD benefits is maintained. COLA is determined based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). If the CPI-W shows a measurable increase from the third quarter of one year to the third quarter of the next, benefits are adjusted accordingly. 

Work credits: An essential part of qualifying for SSD benefits is accumulating enough work credits. These credits reflect your total work history and contributions to the Social Security system via payroll taxes. Generally, you need 40 credits, with 20 earned in the last 10 years, ending with the year you become disabled. Credits are based on your annual earnings: in 2023, for every $1,640 in wages you earn one credit, up to a maximum of four credits per year. The more credits you compile, the greater your eligibility and potential benefit amount. 

Family benefits: Your family members may also be eligible for benefits, which can amount to up to 50% of your PIA. Eligible family members might include your spouse, children, and sometimes even dependent parents. These additional benefits aim to provide greater financial security for families affected by a worker's disability. However, there is a family maximum limit on the combined total benefits your family can receive, which is typically between 150% and 180% of your PIA. 

Frequently Asked Questions About SSD Benefits

1. How long does it take to receive SSD benefits after approval? 

The waiting period for receiving SSD benefits can vary. Typically, it takes about five months before you start receiving payments after you’ve been deemed eligible. This waiting period does not include the time it takes for the SSA to approve your application, which can range from a few months to over a year depending on the complexity of your case and whether appeals are involved. 

2. Can I work while receiving SSD benefits? 

Yes, you can work while receiving SSD benefits, but there are strict limits on the amount you can earn. The SSA provides a "trial work period" allowing you to test your ability to work for at least nine months. During this period, you can earn any amount of money without affecting your benefits. After the trial work period, the SSA applies the Substantial Gainful Activity (SGA) threshold, which, if exceeded, may result in a reduction or cessation of benefits. 

3. What happens to my SSD benefits when I reach retirement age? 

When you reach full retirement age, your SSD benefits automatically convert to Social Security retirement benefits. The amount typically remains the same, and you will not need to apply for retirement benefits separately. This transition ensures that your income continues seamlessly without the need for any additional applications or eligibility assessments. 

Professional Guidance Makes a Difference

Calculating SSD benefits involves numerous nuances and a deep understanding of SSA policies. Enlisting a seasoned disability attorney can help ensure all relevant factors are considered for an accurate calculation of your benefit amount. They can also assist in presenting your earnings and work history effectively, maximizing the benefits you are entitled to receive. 

Whether you're applying for SSD benefits or need assistance in understanding your benefit amount, our Social Security lawyer at Apollo Law PLLC is here to guide you through every step of the process with clarity and precision. 

We represent clients across Kentucky. If you're in the Frankfort, Kentucky, area—including throughout Franklin County, Scott County, Anderson County, Shelby County, Stamping Ground, Peaks Mill, Woodlake, Millville, Bridgeport, Bellepoint, Christiansburg, Shelbyville, Harrisonville, and Alton—reach out to us today for support.