Disability insurance is something that many people don't worry about when they are young, single, and healthy. But as the years pass, and financial responsibilities change, people naturally begin to think about the effects a sudden disability might have on those that depend on their income. That's where Social Security can help.
In fact, the Social Security Administration claims that nearly 30% of working Americans become disabled before reaching their normal retirement age. In this article, we are going to explain some of the disability benefits under the Social Security program. We also have a separate publication that talks about the benefits of purchasing supplementary disability insurance.
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To qualify for disability insurance under the Social Security system, a person must have worked in a job that was covered by Social Security. If they've ever paid money into the Social Security system through payroll taxes, then they've worked in a job covered by Social Security. It's easy enough to verify this contribution by looking at a pay stub.
The entire Social Security benefits program is built on a system of credits or points. Generally, the more someone works, and the more money they earn, the more credits they accumulate. In 2019, workers earned one credit for each $1,360 in wages. The maximum number of credits someone can accumulate each year is four, so they would need to earn $5,440 in 2019 to earn the maximum of four credits.
Generally, citizens will qualify to collect benefits under Social Security if they've earned at least 40 credits. Anyone that doesn't have 40 credits should pay a visit to the Social Security website. There are many exceptions to this rule, especially for younger workers that become disabled.
To qualify for Social Security disability insurance, an individual needs to become totally disabled. If they're only partially disabled, or the disability is expected to last for less than one year, they may not qualify for benefits. Social Security's disability insurance is only for those that cannot return to work, or cannot adjust to other work. A strict disability definition is used, which will be explained briefly below.
To determine if someone is disabled, Social Security has a number of steps a candidate needs to go through sequentially. That means they need to pass each of the steps outlined below to qualify for benefits:
The process of applying for disability insurance benefits under Social Security is very simple; it's possible to call them at their toll free telephone number 1-800-772-1213, or visit the Social Security website link provided earlier.
To figure out someone's exact insurance benefits, the Social Security administration uses historical information they maintain through IRS tax records. We have summarized the categories of benefits below, which go beyond individual benefits. We have also provided several examples, so it's possible to estimate how much insurance someone might qualify for if they become disabled:
Finally, we are going to provide several quick examples, all estimates assume the individual would pass the qualifying tests and have the full credits mentioned earlier:
Example 1: if someone is age 45 and earning around $50,000 annually, their disability insurance benefits would be $1,558 per month, with a maximum family benefit of $2,902 per month.
Example 2: if someone is age 45 and earning around $25,000 annually, their disability insurance benefits would be $1,035 per month, with a maximum family benefit of $1,566 per month.
Example 3: if someone is age 35 and earning around $50,000 annually, their disability insurance benefits would be $1,641 per month, with a maximum family benefit of $3,120 per month.
Example 4: if someone is age 35 and earning around $25,000 annually, their disability insurance benefits would be $1,077 per month, with a maximum family benefit of $1,642 per month.
Example 5: if someone is earning around $95,000 or more, they probably qualify for the maximum disability benefits under the Social Security system. In that situation, the maximum individual benefits are $2,351 each month with a maximum family benefit of $4,140 monthly.
Once again, a detailed benefits calculator can be found on the Social Security website.
Social Security is funded through a combination of employer taxes and employee payroll deductions. Each year the amount of money an individual can contribute to Social Security, or receive in the form of benefits, is increased by a Cost of Living Adjustment (COLA). Employees are taxed at a rate of 6.20% (OASDI), subject to maximum taxable earnings / contributions as shown in the table below:
| 2010 | 2011 * | 2012* | 2013 | 2014 | 2015 | 2016 ** | 2017 | 2018 | 2019 | |
| Tax Rate | 6.20% | 6.20% / 4.20% | 6.20% | 6.20% | 6.20% | 6.20% | 6.20% | 6.20% | 6.20% | 6.20% |
| Earnings Limit | $106,800 | $106,800 | $110,100 | $113,700 | $117,000 | $118,500 | $118,500 | $127,200 | $128,400 | $132,900 |
| Maximum Contribution | $6,621.60 | $6,621.60 / $4,485.60 | $6,826.20 | $7,048.40 | $7,254.00 | $7,347.00 | $7,347.00 | $7,886.40 | $7,960.80 | $8,239.80 |
| COLA for Benefits | 0.0% | 0.0% | 3.6% | 1.7% | 1.5% | 1.7% | 0.0% | 0.3% | 2.0% | 2.8% |
| SSI Benefit Individual | $2,366 | $2,366 | $2,513 | $2,533 | $2,642 | $2,663 | $2,639 | $2,687 | $2,788 | $2,861 |
* Note: In 2011, employer contributions remained at 6.20%, while the rate was reduced to 4.20% for employees. The reduction to the Social Security withholding rate was extended through February 29, 2012.
** Note: There is a decrease in full maximum benefits when there is no COLA, but there is an increase in the national average wage index.
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