Many beneficiaries of Social Security Disability Insurance (SSDI) claim to be living paycheck to paycheck and struggling to make ends meet. This may cause some to wonder why social security disability insurance pays so little.
The reason why social security disability insurance pays so little has to do with the lack of funds available to the government. There are a growing number of SSDI applicants each year, and the tax collections have not been able to make up for it.
Keep reading below as we analyze in more detail why disability insurance payouts are so low.
How Disability Insurance is Calculated
Disability insurance is calculated differently by the Social Security Administration (SSA), depending on which program you are applying for.
Social Security Disability Insurance
When calculating your monthly Social Security Disability Insurance payment, your average pre-disability wages will be used as a benchmark.
People who have paid more in taxes on their wages prior to becoming disabled receive larger insurance payments. Your benefit payment won’t change based on things like your family’s income, the type of condition you have, or how severe your condition is.
Your Primary Insurance Amount (PIA) and Average Indexed Monthly Earnings (AIME) determine the amount of SSDI you are eligible to receive each month.
Your AIME is determined based on the earnings of up to 35 years of your total years in the workforce. The Social Security Administration takes into account the years in which your indexed earnings were the highest and then totals the earnings for those years before dividing them by the total number of months for those years.
The AIME is then calculated by rounding down the average.
Your PIA indicates the basic amount of your benefits. It is determined by adding up three set percentages of your AIME as well as a set of bend points that are revised on an annual basis to account for changes in the national average wage index.
Earnings up to the first bend point are distributed at 90%, those at the second bend point at 32%, and those above the third bend point at 15%.
Visit the Social Security Administration’s website to find out how much money you are likely to receive. Get your benefits statement by making an account. If you are eligible for SSDI benefits, this statement will detail your expected payment based on your covered wages for each year.
If you feel ready to return to work, there are programs to help you financially as you re-enter the workforce. The Social Security Administration has instituted a Trial Work Period (TWP) of nine months (these do not have to be sequential) within a 60-month term that allows participants to return to work if they believe they are ready to do so.
You can earn as much as you like during these nine months and not have it influence your benefits in any way.
After completing your TWP, you’ll be eligible to enter the Extended Period of Eligibility (EPE).
This is a period of 36 months during which you are eligible to receive the entire amount of your benefits each month as long as you continue to be disabled and your earnings are less than the amount considered to be a substantial gainful activity (SGA).
The single-person poverty line serves as the basis for the annual adjustment to the SGA threshold. The SGA amount for 2023 is $1,470 per month.
Supplemental Security Income
Supplemental Security Income, in contrast to SSDI, is a needs-based financial assistance program. Cash compensation may be available to those who are low-income, have few assets, and do not have enough work credits to qualify for Social Security Disability Insurance.
It is possible to file for both SSDI and SSI at the same time if your SSDI payment is very low.
The Federal Benefit Rate (FBR) is the basis for determining SSI payments. The FBR for an eligible individual in 2023 is $914, and the FBR for a married couple is $1,371. Your benefit payments will be reduced by whatever income you earn, including money from odd jobs.
Reasons Why Disability Insurance Pays So Little
The primary reason why SSDI payouts are so low is that the government just does not have the funds to pay a reasonable amount to the large number of people who rely on this program.
The reasons for this lack of funds include:
A Large Number of Beneficiaries
When an employee has a serious impairment that prevents them from working, the federal government’s Social Security Disability Insurance program steps in to compensate for a portion of their lost income.
The program is meant to help those who are unable to work due to a serious health condition that would either remain for at least a year or cause their death.
Despite the fact that the percentage of the U.S. working-age population that reports a severe impairment has been about the same over the past few years, the number of people registered for SSDI has grown dramatically in recent years.
In addition, developments in medicine have made life better for people with disabilities, and fewer people are doing physically demanding jobs. In 2023, 67 million beneficiaries and 180 million insured employees and their families will rely heavily on Social Security.
This is a dramatic increase from 1990, when the number of SSDI recipients was 4.3 million, through 2000, when it was 6.7 million, and 2012, when it was 10.9 million. In the last two decades, the share of the population receiving SSDI relative to the total working-age population has doubled.
The SSDI trust fund is depleting at an alarming rate since benefit payments continue to exceed tax revenues, which are collected through a 1.8% payroll tax as part of the larger Social Security tax.
Medicare Expenses
Medicare costs have gone up along with the number of people receiving SSDI since these people are eligible for the federal health program. More than 9.1 percent of GDP in 2023 will go toward covering the expense of Medicare for those receiving Social Security Disability Insurance.
Relaxed Requirements
The SSDI eligibility evaluation process is complex. Examiners for the Social Security Disability Insurance program take applicants through multiple stages of verification before deciding whether or not to grant them benefits:
(1) they have the necessary amount of work experience;
(2) they are no longer actively engaged in substantial gainful activity;
(3) they suffer from a severe impairment that is expected to last for at least 12 months or result in death;
(4) the particular impairment is listed in or is comparable to a listing of medical conditions in the SSA’s Blue Book
Those who meet these standards are considered disabled. If an applicant’s disability is not listed in SSA’s listings (or is not equivalent to a condition listed), a two-step evaluation is conducted to determine if the applicant can perform any gainful activity in light of their age, education, and work experience.
Policymakers have continually loosened SSDI eligibility rules over the years, leading to numerous individuals who can work choosing not to work and instead collect SSDI payments.
This is harmful to taxpayers and the economy at large since it encourages otherwise productive people to become dependent on the government for the foreseeable future.
Abuse of the Social Security Disability Insurance program is rampant due to its lax eligibility rules, increased benefits, and lenient court rulings.
Due to the system’s tendency toward granting benefits to new applicants, many people who could be working are instead receiving government help.
Does SSDI Pay More Than SSI?
Which program, SSI or SSDI, provides a bigger monthly payout to those who are disabled? The answer is not black and white, as is often the case with government programs.
To reiterate, the distinction lies in the fact that the Social Security Disability Insurance program offers direct disability benefits to working-age people who have become disabled and are in need of financial help. Adults with low incomes and few assets, as well as children who are disabled, are eligible to receive SSI benefits.
Most of the time, SSDI payments are higher than SSI payments. Nevertheless, there are exceptions to just about every government initiative. Think about how close you are to reaching the age of retirement when trying to decide which program is most advantageous for you.
If you are under retirement age and qualify for SSDI, you could receive more than twice as much as you would receive from SSI.
If you have reached your full retirement age, you may no longer qualify for Social Security Disability Insurance or Supplemental Security Income, depending on the circumstances surrounding your impairment and how they are resolved.
If you are unsure whether or not you are still eligible for disability benefits, you should call the Social Security Administration’s office to request your last insured date.
Other Benefits
Let’s say you’ve been approved for federal disability benefits. If this is the case, then more assistance may be available to you based on the requirements of the program as well as the amount of money you make.
Certain states, such as North Carolina and South Carolina, offer their own supplemental health insurance. If you are currently receiving supplemental security income, this supplement may help you offset your cost of living.
There are other possibilities for assistance, such as the ones listed below.
Medical Expenses
Medicare’s Extra Help program may be able to provide you with additional financial assistance to help with the high cost of your medications. The Patient Advocate Foundation’s Co-Pay Relief program may be able to help you as well.
Food Expenses
The Supplemental Nutrition Assistance Program (SNAP) is one such program that may help provide you with food. To see if you qualify for this program, you would need to go through the proper channels in your state.
Housing
Public housing and rent subsidies may be available to people who are receiving disability payments. You will probably have access to all of these resources through the programs offered by your state.
Telephone Expenses
The Federal Communications Commission’s Lifeline Program provides financial aid to low-income Americans for the cost of telephone service. Discounts on your monthly phone bill may be available through this service.
Find out what federal, state, and local programs exist as part of your research. Finding help through religious or charitable organizations can be another option.
Can I Apply for Both SSI and SSDI?
In order to receive SSI benefits in addition to SSDI, your monthly unearned income must be at or below $735. However, the SSI income restrictions can be confusing, as they vary by state and are different for those who work and earn income. There are asset limits in the SSI program as well.
Supplemental Security Income and Social Security Disability Insurance may be received simultaneously if a person meets the financial requirements for both programs and has worked long enough in a job that contributed to the Social Security system to be eligible for both programs.
But remember, your SSDI payment is factored into whether or not you qualify for SSI. In a lot of cases, the amount of your SSDI benefit will be too high for you to qualify for SSI.
The overall benefit is not more than what you would receive each month from SSI alone. SSDI will reduce your SSI benefit so that both benefits add up to the maximum SSI amount. If your SSDI benefit is less than the present monthly SSI payment amount and you are eligible for SSI, you will receive an SSI payment.
To put it another way, you can receive both SSI and SSDI payments simultaneously if your SSDI benefit is less than the monthly maximum.
The Social Security Administration will decide if your claim is concurrently based on your earnings and resources, regardless of whether you apply for SSI, SSDI, or both. Your claim’s categorization will have no bearing on its individual processing.
That is to say, the process of handling an SSI claim is identical to that of handling an SSDI claim. Both programs employ the same criteria for determining impairment.
Conclusion
So, although your disability insurance payout depends on a number of factors, it is generally very low due to a lack of government funds. It might be helpful to talk to a disability attorney to find out ways to maximize your disability payments.
