Government disability benefits are no match for the supplemental income you get from an individual plan. Here's why.
People who become disabled and can’t work can sometimes qualify for Social Security disability benefits. Although these benefits can partially help a person recovering from a disability, Social Security should not be fully depended on to provide sufficient protection for your income.
In this guide, we cover everything you need to know about government disability benefits, including:
- What is Social Security Disability Insurance?
- How do I get Social Security Disability Insurance?
- Will Social Security Disability benefits be enough?
Read on to learn more.
What is Social Security Disability Insurance?
Social Security Disability Insurance (SSDI) is a federal, payroll-tax funded program that was signed into law by President Dwight D. Eisenhower in 1956 and is managed by the Social Security Administration to this day.
Also commonly referred to as government disability, it is designed to provide supplemental income to people who are physically restricted from working because of a disability. SSDI has a strict definition of disability and the typical monthly benefit is far less than what most people need to live on.
How does a person qualify for SSDI?
Unlike other types of disability coverage, SSDI is not for sale. You cannot simply buy it the same way you would an individual disability insurance plan. Rather, the taxes you pay into the Social Security system make you eligible to receive benefits if you become disabled.
To qualify for the SSDI program, you must have worked a certain number of years in a job where you paid Social Security taxes. These are also known as FICA taxes. Paying Social Security taxes earns you a certain number of work credits. You can earn up to four work credits per year.
The amount needed for a work credit changes from year to year. In 2019, people earned one credit for each $1,360 in ages or self-employment income. Once you’ve earned $5,440, you’ve earned your maximum four credits for the year.
The number of work credits you need to qualify for SSDI depends on your age. The older you are, the more work credits you need.
For example, if you become disabled before you turn 24, you may qualify if you have 6 credits earned in the 3-year period ending when your disability starts.
If your disability occurs between the ages of 31 and 42, you would need 20 credits. For each year you get older, you need one additional work credit to qualify for SSDI. At age 43, you need 21 work credits. You need 22 at age 44 and 23 credits at age 45. At age 62, you need the maximum 40 credits to qualify.
In addition to having work credits, you must also qualify medically for SSDI benefits.
How does SSDI define disability?
SSDI has a stricter definition of disability than most private disability insurance policies.
If you are working and make more than $1,220 a month, you generally cannot be considered disabled by SSDI standards. Social Security doesn't provide temporary or partial disability benefits, like workers' compensation or veterans' benefits do.
If you are not working while applying for benefits, your application is sent to the Disability Determination Services (DDS) office, who will evaluate your medical condition.
DDS will assess the severity of your condition. To qualify, you must be significantly limited in your ability to do basic work such as lifting, standing, walking, sitting and remembering. In addition, the condition must be severe enough that it’s expected to last at least 12 months and/or result in death. Otherwise, Social Security will not consider you disabled.
In addition, DDS maintains a list of medical conditions considered severe enough to prevent a person from working. Most of the listed impairments are permanent or expected to result in death, or the listing includes a specific statement of duration.
What if my condition is not on SSA’s list of impairments?
If your condition is on the list, you have a much greater chance of qualifying for benefits. If not, DDS will assess whether you can perform your previous job and, if not, whether you can do any type of work at all.
The first the agency will assess is your residual functional capacity. They will determine what you can still do, despite any limitations caused by your condition and related symptoms, such as pain and fatigue. DDS will assess how you medical condition affects your ability to:
- Exert yourself physically for various work-related activities (such as sitting, standing, walking, lifting, carrying, pushing, pulling).
- Do manipulative and postural activities (such as reaching, handling large objects, using your fingers, feeling, stooping, balancing, climbing stairs or ladders, kneeling, crouching, crawling).
- Tolerate certain environmental conditions (such as temperature extremes, wetness, humidity, noise, hazardous working conditions like moving machinery or heights, dust, fumes, odors, gases, poor ventilation, vibrations).
- See, hear, and speak.
- Maintain concentration and attention at work.
- Understand, remember and carry out instructions.
- Respond appropriately to supervisors, co-workers, and usual work situations.
- Cope with changes in the work setting.
DDS will also consider your medical condition, age, education, past work experience and transferable skills.
The agency will request information about all of the paid work you performed in the previous 15 years, including:
- Main responsibilities of your job(s)
- Main tasks you performed
- Dates you worked (month and year)
- Number of hours a day you worked per week
- Rate of pay you received
- Tools, machinery and equipment you used
- Knowledge, skills and abilities your work required
- Extent of supervision you had
- Amount of independent judgment you used
- Objects you had to lift and carry and how much they weighed
- How much you had to sit, stand, walk, climb, stoop, kneel, crouch, crawl, balance
- How you used your hands, arms and legs
- Speaking, hearing and vision requirements of your job(s)
- Environmental conditions of your workplace(s)
If it’s determined you can’t do other work, you will be considered disabled and qualify for benefits. If DDS determines you can perform other jobs, your claim will be denied.
You will also be denied if you fail to provide sufficient medical documentation or to follow your physician’s orders. Another cause for denial is a disability caused by drug or alcohol use.
Most people who apply for SSDI benefits are turned down. According to SSA, only 23 percent of initial applications are accepted. Another 2 percent are approved after a first appeal and 9 percent get benefits after having their case heard by an administrative law judge.
How do I apply for SSDI?
There are three ways to apply for Social Security disability insurance:
The first step when applying for SSDI is to fill out the SSA’s Disability Report form.
You should be prepared to provide a large amount of information to SSA when applying, including:
- Names, dates and places of birth and Social Security numbers for yourself, current and former spouses and your minor children.
- Your bank account number if you want the benefits electronically deposited.
- Detailed information about your medical illnesses, injuries and conditions, including contact information for treating physicians and clinics.
- Medications you are taking and the prescribing physician(s).
- Your current employer and what you earned in the current and previous years.
- All jobs you’ve worked (up to five), in the 15 years prior to when you became unable to work. Include the dates you worked at those jobs.
- A copy of your Social Security Statement.
- Beginning and end dates of any active U.S. military services before 1968.
- Information about any workers’ compensation benefits you field for or intend to file for.
- You may also be asked for the following documents:
- Birth certificate
- Proof of U.S. citizenship if not born in the U.S.
- Military discharge papers if you served before 1968
- W-2 forms and/or self-employment tax returns for the previous year before you apply
- Medical records and recent test results
- Award letters, pay stubs, settlement agreements or other proof of any temporary or permanent workers’ compensation-type benefits you received
The most important part of applying for SSDI is providing medical evidence showing you have a disability and its severity. SSA, with the claimant’s permission, will help the claimant get medical evidence from his or her own medical sources who have evaluated, examined, or treated them. SSA also requests copies of medical evidence from hospitals, clinics, or other health facilities when appropriate.
Once you have applied for benefits, SSA will confirm receipt of your application either electronically or by mail.
The agency will review your application and contact you if more documentation is needed. Once they’ve completed their review, SSA will mail its decision to you.
If you’re approved, the letter will include the amount of your monthly benefit and the effective date. Benefits typically begin the sixth full month after the date your disability began.
What happens if my application for SSDI is denied?
Most applications for SSDI are initially denied. If this occurs, you can appeal the decision. You have to request a review within 60 days of when you receive the denial letter.
The first step of the appeal process is to submit a Request for Reconsideration. This is a review of your file by a different disability claims examiner.
If you are denied again, you can request a hearing with an administrative law judge who works for the SSA. This step gives you the opportunity to bring witnesses, including medical and vocational experts, who can vouch for your inability to work.
Another step you can take is to hire an attorney to make your case with SSA. An attorney can file a lawsuit in federal district court seeking to overturn SSA’s denial decision.
How much does SSDI pay in benefits?
If you manage you get through the application process and receive a favorable benefits ruling, don’t expect a large check each month.
SSDI pays a monthly cash benefit based on your lifetime average earnings covered by Social Security.
According to SSA, the average monthly disability paid by SSDI was $1,234 at the beginning of 2019.
Your benefit may be reduced if you receive workers compensation or other public disability benefits.
SSDI also pays disability insurance benefits to a disabled worker’s spouse and children. The benefits average about $350 a month.
Can I rely solely on SSDI in the event I can’t work?
Because of the difficulty in obtaining SSDI benefits and the low monthly benefit, it’s advised that workers also have their own private long term disability insurance.
When you buy a long term disability insurance policy, you enter into a contract with an insurance company. You make regular premium payments to the insurer, usually monthly, quarterly or annually. In exchange for those payments, the company agrees to pay you contracted benefits in the event you suffer a disability that limits your ability to earn income. The benefits from the insurer essentially replace some or all of the income you lost by being unable to work.
Long term disability insurance has a number of advantages over SSDI.
First, you will receive a much larger monthly benefit. Depending on your policy, you will receive 60 percent to 80 percent of your pre-disability income in benefits.
Second, insurance policies have a more relaxed definition of disability. That means you’re more likely to collect benefits from an injury or illness that affects you ability to work from a LTD policy than you are from SSDI. Some policies will consider you disabled if an injury or illness limits your ability to work in your chosen profession even if you’re physically able to do other work.
Another advantage is that an LTD policy may provide benefits if you are only partially disabled. For example, if a disability only allows you to work half-time instead of full-time, you can collect disability benefits based on the lost income from working less. SSDI does not paid partial benefits.
You can also get a long-term disability policy that begins paying benefits sooner than SSDI. Whereas your first benefit check from SSDI will take six months, LTD policies can be set up to starting paying 30, 60, or 90 days following a disability.
And private disability policies also have added features not available on SSDI. Some of the optional features on some LTD policies include:
A residual disability rider provides benefits if you are able to perform some, but not all, of your job following a disability. It also applies if you have to work less because of your disability. Benefits are typically calculated as a percentage of your loss of earnings or of what you would receive if you were unable to work.
A future increase rider enables you to increase your coverage amount at designated future dates. This may occur at certain ages, after major life events, if your income increases or if you lose group coverage. You won’t have to go through underwriting to increase your benefits.
A catastrophic disability rider can help pay for care needed due to a catastrophic injury or illness. This can apply if you suffer a complete loss of one of your senses: speech, hearing in both ears, sight in both eyes, use of both hands, use of both feet, or use of one hand and one foot.
There are also two main sources for where to get disability insurance: You can buy a policy that’s part of a large group plan and/or purchase your own individual policy.
One thing to keep in mind is that your long-term disability insurance policy may require you to apply for SSDI if you need to claim benefits from your policy. This is often done to enable your insure to reduce LTD benefits by the amount you receive in SSDI benefits.
The bottom line on SSDI
SSDI benefits are nice to have. But in most cases, they are simply not enough.
Jack Wolstenholm is the head of content at Breeze.
The information and content provided herein is for educational purposes only, and should not be considered legal, tax, investment, or financial advice, recommendation, or endorsement. Breeze does not guarantee the accuracy, completeness, reliability or usefulness of any testimonials, opinions, advice, product or service offers, or other information provided here by third parties. Individuals are encouraged to seek advice from their own tax or legal counsel.