How The Social Security Disability Benefits Calculation Works
Social Security will inform you of the exact amount of your benefits when it sends you the notice stating that your claim has been approved. How do they arrive at this figure? Well, the disability benefits calculation uses some pretty complex formulas. We'll try to explain them later on in this article, but be forewarned that most people find them confusing. Honestly, it really doesn't make a lot of sense to try to calculate your monthly benefit. There are many factors that can come into play in addition to the benefit formula, such as salary, pension payments, other disability payments and worker compensation.
It's much more practical to let the SSA take care of the computations, since they deal with the formulas on a day-to-day basis. Of course, it is possible that they could make an error, and if you want to check their numbers, you can find a calculator on the SSA website that will help you. Remember that the program is just for your own information, does not provide an official benefit amount, and if using it gives you a figure that's within a few dollars of your actual benefit, then you should assume there's no problem. If the calculator provides figures that are way off from your official benefit amount, of course you would want to check with the SSA regarding the reason.
Here are some averages for Social Security benefit payments as of the beginning of 2006:
Disabled workers $939
Disabled worker, spouse, and one or more children $1571
Retired single widow(er) $967
Retired couple both receiving benefits $1648
The formula used for disability benefits calculation is as follows: The SSA will calculate the average using a period of your highest 35 years of earnings (or all years if you don't have 35). This is called the AIME for average indexed monthly earnings. This AIME is used to figure the PIA, or primary insurance amount. This PIA is the figure that will be used to figure your actual amount of benefits. The SSA will use percentages of predetermined dollar amounts of the AIME to come up with the PIA. As of 2006, here's how it works for disability payments:
Percentage Amount of AIME
I told you it was confusing! I'll try and explain further. Say your AIME was $4200. The SSA would take $656 x 90% which equals 590.40, then take $3955 minus 656 = 3299 x 32% which equals 1055.68, and finally take $4200 minus 3955 = 245 x 15% which equals 36.75. Adding together 590.40, 1055.68, and 36.75, they would get 1682.80 after rounding to the nearest .10.
If you have any family members who are eligible to collect benefits, there is another figure that needs to be taken into account when performing a disability benefits calculation, called a maximum family benefit (MFB). The MFB is the total monthly payment that can be paid to the wage earner and any family members entitled to Social Security benefits on the wage earner's record. The formula for determining the MFB is perhaps more confusing than the one for PIA. For 2006, these were the MFB benefits for a disabled worker:
150% of the first $838 of PIA, plus
272% of PIA over $838 through $1210, plus
134% of PIA over $1210 through $1578, plus
175% of PIA over $1578