How Are Social Security Disability Settlements Calculated?

An injury or illness that causes disability can be traumatic, and not being able to work can leave you feeling lost and hopeless. Social Security Disability benefits can be a lifeline for individuals unable to work due to severe medical conditions. 

Delayed, undervalued, or improperly denied claims, however, can make the stress and serious financial hardship all the more unbearable.

If you are filing for Social Security disability, understanding how these settlements are calculated can help you ensure you receive the full financial support you deserve. 

Understanding Social Security Disability Benefits

The Social Security Administration (SSA) offers two primary types of disability benefits:

Social Security Disability Insurance (SSDI)

SSDI is available to individuals who have worked and paid Social Security taxes. The benefits are based on your lifetime earnings before your disability.

Supplemental Security Income (SSI)

SSI provides financial assistance to individuals with limited income and resources, regardless of work history. This program is need-based and is funded by general tax revenues.

What Factors Determine Your Disability Benefit Amount?

Several factors influence the amount of your Social Security Disability settlement, including:

• Work History (SSDI): The SSA calculates your SSDI benefit amount based on your Average Indexed Monthly Earnings (AIME) during your highest-earning years.
• Primary Insurance Amount (PIA): Once your AIME is determined, the SSA applies a formula to calculate your PIA. This is the base amount you will receive monthly if you qualify for SSDI.
• Cost of Living Adjustments (COLA): Your SSDI payments may increase annually based on COLA to account for inflation.
• Income and Resources (SSI): For SSI, the SSA considers your current income and resources. The federal benefit rate (FBR) is the maximum SSI payment, but your actual payment may be reduced if you have other income.

Additional Benefits That Impact Settlement Calculations

Your Social Security Disability settlement may also include:

Retroactive Payments

If the SSA determines that you were eligible for benefits before the date you applied, you may receive retroactive payments. SSDI retroactive payments can go back up to 12 months before your application date.

Back Pay

Back pay refers to the benefits owed to you from the date you applied to the date your claim was approved. The SSA calculates this amount based on your PIA or SSI payment rate.

Dependents’ Benefits

For SSDI beneficiaries, eligible dependents, such as minor children or spouses, may receive additional monthly payments. These are typically 50% of your PIA.

How Are Settlements Calculated for SSDI and SSI?

There are distinct methods for calculating settlements for both SSDI and SSI:

SSDI Settlement Calculation

• Determine Your AIME: The SSA reviews your earnings record to calculate your average monthly earnings.
• Apply the Formula: The SSA applies a weighted formula to your AIME to calculate your PIA:
  • 90% of the first $1,310 (2024 limit) of your AIME
  • 32% of AIME between $1,310 and $7,945
  • 15% of AIME above $7,945

The sum of these percentages is your monthly SSDI payment, subject to annual COLA increases.

SSI Settlement Calculation

• Start with the FBR: For 2024, the FBR is $914 for individuals and $1,371 for couples.
• Subtract Countable Income: Your SSI payment is reduced dollar-for-dollar by any countable income, including wages, pensions, or other benefits.

Common Deductions and Offsets

Your Social Security Disability settlement could be reduced due to:

• Workers’ Compensation Benefits: If you receive workers’ compensation, your SSDI payments may be offset to ensure your total benefits do not exceed 80% of your average current earnings.
• Public Disability Benefits: State or local government disability benefits could also impact your SSDI payments.
• Garnishments: Certain debts, such as child support or alimony, can result in garnishments from your disability payments.

How To Maximize Your Social Security Disability Settlement

To maximize your total Social Security disability settlement, you should firstly provide comprehensive medical evidence. The SSA requires detailed medical documentation to prove your disability. Include all relevant records, such as diagnostic tests, treatment plans, and doctor’s statements.

Also importantly, contact Morgan & Morgan for help. Navigating the Social Security Disability claims process can be overwhelming. An experienced attorney can help you file your application correctly, appeal denied claims, and maximize back pay and retroactive benefits.

As your claim is in process, carefully monitor your application progress. Delays are common in Social Security Disability cases. Regularly check your case status and follow up with the SSA to ensure your application is progressing.

What Are Common Challenges in Disability Settlements?

Denied Claims

The SSA denies a significant number of initial disability claims. Common reasons include insufficient medical evidence or failure to meet eligibility criteria.

Long Processing Times

It can take several months or even years to receive a decision on your claim. Backlogs in the SSA system often contribute to delays.

Errors in Calculation

Mistakes in your earnings record or other miscalculations can impact your benefit amount. Review your SSA statement to ensure accuracy.

Frequently Asked Questions

How long does it take to receive Social Security Disability benefits?

The timeline varies, but it can take several months to over a year to receive a decision. Back pay and retroactive payments compensate for the waiting period. When you work with Morgan & Morgan, your legal team will keep you regularly updated with your progress.

What happens if my claim is denied?

If your claim is denied, it doesn’t mean you’ve reached the end of the road. Many initial claims are denied due to incomplete information or insufficient evidence. Common reasons for denial include:

• Insufficient Medical Evidence: Your disability may not meet the SSA’s strict criteria or lack adequate documentation.
• Exceeding Income or Resource Limits: SSI is a needs-based program, and exceeding the income or asset threshold can result in denial.
• Failure to Follow Treatment Plans: Not adhering to prescribed treatments without valid reasons can harm your claim.
• Incomplete or Inaccurate Application: Missing details or errors in your application can lead to denial.

If your claim is denied, you have the right to appeal. The appeals process consists of four main levels:

1. Request for Reconsideration

The first step in the appeals process. A different SSA official will review your application and any new evidence you provide. You must file the request within 60 days of receiving the denial notice.

2. Hearing Before an Administrative Law Judge (ALJ)

If reconsideration is denied, you can request a hearing before an ALJ. This is an opportunity to present your case in person or via video conference. File the request within 60 days of the reconsideration denial.

3. Appeals Council Review

If the ALJ denies your claim, you can ask the Appeals Council to review the decision. The council may deny your request, send the case back to the ALJ, or make its own decision. Submit the request within 60 days of the ALJ decision.

4. Federal Court Review

If the Appeals Council denies your request or upholds the ALJ’s decision, you can file a lawsuit in federal district court. File the lawsuit within 60 days of the Appeals Council’s decision.

Do I need an attorney to file for Social Security Disability benefits?

While it is not legally required to work with a legal representative, an attorney from Morgan & Morgan can greatly improve your chances of approval and help you maximize your benefits by ensuring your application is complete and error-free.

If you require assistance for calculating SSDI or SSI benefits or need help with an appeal, contact Morgan & Morgan today to get started for free.

How Morgan & Morgan Can Help

At Morgan & Morgan, our experienced disability attorneys are dedicated to helping clients secure the benefits they deserve. From gathering medical evidence to appealing denied claims, we will advocate for you every step of the way.

Calculating Social Security Disability settlements can be complex, with numerous factors influencing the final amount. Whether you’re seeking SSDI or SSI benefits, Morgan & Morgan can be by your side through the entire process. Working with one of our experienced attorneys can ensure you navigate the system effectively and maximize your benefits.

For over 35 years, Morgan & Morgan has fought For the People, and we’ve recovered over $23 billion for our clients in the process. As the largest personal injury law firm, we have the resources to help with a case of any size. 

Hiring one of our lawyers is easy, and you can get started in minutes with a free case evaluation.