At some point, any of us may suffer a health breakdown that results in temporary or permanent inability to work. That’s why the Social Security Disability Insurance (SSDI) exists. The amount of your disability benefits will depend on your average lifetime earnings before you become disabled.
Understanding the intricacies of this process can significantly impact your financial planning, particularly regarding SSDI benefits. The key determinant for the amount of your disability benefits are related to your average lifetime earnings before the onset of your disability.
How Are the SSDI Benefits Calculated? Know Your Potential Income
To start, consider that the severity of your disability or your household income won’t factor into this calculation. Instead, the focus lies on the earnings history. If you’ve contributed more in taxes through your wages, you can expect more substantial insurance payments.
For SSDI recipients, the Average Indexed Monthly Earnings (AIME) is the thing to know. The AIME is computed based on up to 35 years of your work history. The Social Security Administration (SSA) sums the highest indexed earnings from these years and divides this total by the number of months in those years. This calculated average is then rounded down to determine your AIME.
Now, let’s establish what is your Primary Insurance Amount (PIA), which directly influences the benefits you’re eligible to receive. The SSA methodically indexes your wages, ensuring they keep pace with inflation and the evolving cost of living over the years. This practice guarantees that your relative income remains consistent, even if the numerical value may fluctuate due to the increasing costs of living.
The SSA assesses up to 35 years of your wage history in this process, with the aim of providing a fair and equitable basis for calculating your SSDI benefits for 2024. To calculate your primary insurance amount, you’ll need to dissect your AIME into three distinct parts. As of 2023, the first segment corresponds to the initial $1,115 of your earnings, the second encompasses earnings falling between $1,115 and $6,721, and the third pertains to earnings surpassing $6,721.
The formula governing your SSDI benefit for 2024 stipulates that it shall amount to 90% of the first segment, 32% of the second, and 15% of the third. Additionally, it’s important to note that the SSA always rounds down to the nearest whole number after computing the decimal figure, thereby determining your precise monthly SSDI benefit.
You Can Also Consider Applying for SSI Benefits: Supplemental Security Income (SSI), in contrast to Social Security Disability Insurance (SSDI), operates on a needs-based model. SSDI provides monetary assistance to individuals with low income, minimal assets, and an insufficient work history. A concurrent claim arises when someone receiving modest SSDI benefits also qualifies for SSI support.