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Understanding how Social Security disability is calculated

On Behalf of | Apr 22, 2022 | Social Security Disability |

Social Security Disability Insurance, also known as SSDI, is a crucial part of many people’s medical payments in North Carolina – as well as just paying for things in their everyday lives. If you are applying for SSDI and want to determine the benefits you can expect to receive, understanding how the process usually unfolds may help to elucidate any uncertainties.

From a mathematical perspective, these types of benefits look identical to the way retirement benefits are calculated in Social Security. It all has to do with what are called covered earnings, which refers to all the money that you made and paid your Social Security taxes on. But while these two calculations look similar, the difference is in the amount of data that comes into play as well as the timeframes that are used.

How are your benefits calculated?

The first thing that the SSA – Social Security Administration – does when calculating your benefits is to determine how much money you make per month on average. This value is then adjusted based on historical wage growth.

Next, the figure is plugged into a formula that gives the SSA your PIA – short for primary insurance amount. Sometimes, this is also referred to as your full retirement benefit.

The formula that determines your PIA is designed in such a way that it sets up those who earn less with a higher proportion of Social Security disability benefits. This progressive formula is the same as the one that is used for retirement benefits as well.

If you are retired, the SSA will take the 35 years in which you earned the most money and use that to calculate an average for your PIA. Once you have hit your full retirement age, you will be eligible to claim the full amount.