Image source: Pixabay.com

Social Security disability benefits are not easy to understand or obtain, but they're incredibly important for some people. After all, about one in four Americans will become disabled before they retire.

Around 65% of all initial Social Security disability claims get denied -- though a substantial portion of those later get awarded on appeal. The reason so many claims initially get denied is that Social Security uses what it calls a "strict definition of disability" to determine who qualifies. If Social Security doesn't think you qualify based on what you submit, it will deny you.

Social Security's key criteria are that you:

  • Cannot do the work you did before,
  • Cannot adjust to other work because of your medical conditions, and
  • Are expected to be affected by your disability for at least a year or to die from it. 

Applicants face a long road ahead
Social Security's disability benefits qualification rules are designed to pay only those who are truly long-term disabled. Because of this, it's important to start the application process as soon as you become disabled. Social Security's rules and processes presume that you have another source of income or assets to cover short-term disabilities. Additionally, the application process itself takes time as Social Security researches your request.

If you plan to apply for disability benefits, then you'll need to have a realistic time frame mind, so consider the following:

  • It typically takes around three to four months to get an initial decision.
  • If you're rejected, it may take another three to four months to process a reconsideration.
  • If you need an administrative judge to review the case, add another seven to 22 months.
  • If you need to appeal that decision within the Social Security system, it may take another year.
  • If you need to appeal to the Federal district court, it might take another eight months or so. 

If you are ultimately approved for Social Security disability benefits, you can receive "back pay" benefits. That back pay is based on when your disability started, when you applied for benefits, and what type of disability coverage you have been qualified to receive. Still, there are no guarantees unless and until your claim is approved, and you have to cover your costs of living in the interim.

What types of disability benefits does Social Security offer?
The Social Security Administration manages two separate disability programs: Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI). SSDI is funded by the disability insurance portion of your Social Security payroll tax, and SSI is funded by the Federal government's general revenues. For either program, you can apply over the phone or at your local Social Security office. You can also apply for SSDI online.

There are some key differences between SSI and SSDI. First, SSI is a means-tested program. If your income is too high or you have too many assets, your claim will be denied. From an assets perspective, the limit is $2,000 for an individual or $3,000 for a couple. When it comes to income, the threshold is a number known as the "Federal Benefit Rate" (FBR). If your included income is above the FBR, you won't qualify. In 2015, the monthly FBR is $1,100 for couples and $733 for individuals.

Not all of your income counts toward the FBR. For instance, the first $65 you earn from working in a month doesn't count, and neither does half the monthly income you earn above that $65 level. Some "in-kind" benefits count as income, however, even if you don't see cash from them. For instance, if you're living rent-free with a friend or family member, the amount you would otherwise be paying for rent is counted as if you earned the money to cover your room and board. 

SSDI, on the other hand, is not means-tested, but if you are able to engage in "Substantial Gainful Activity" that earns you over $1,090 per month (or $1,820 if blind), then you won't qualify for benefits. To qualify for SSDI, in addition to being disabled, you must have earned enough Social Security credits recently enough to receive payments. You earn a Social Security credit for earning $1,220 within a year, and you can earn up to four credits within a year. 

The general rule is that you need at least 40 credits to qualify, with at least 20 of those credits earned within the decade prior to becoming disabled. If you're blind, there's no time limit regarding when you earned the credits. If you're younger than 62, however, you can qualify with fewer than those 40 credits.

According to Social Security, if you become disabled...

  • Before age 24: You qualify if you've earned six credits within three years prior to the start of your disability.
  • Between age 24 and 31: You qualify if you've earned at least half the number of credits you would have received by working full time between age 21 and your age at disability.
  • Above age 31: See chart below. 

Age at Disability

Number of Credits Required

44-45

22

46-47

24

48-49

26

50-51

28

52-53

30

54-55

32

56-57

34

58-59

36

60-61

38

62-Full Retirement Age

40

Source: Social Security Administration. 

Once you've reached your full retirement age, your disability payments automatically switch to retirement payments. 

When do benefits get paid?
For SSI, benefits are generally paid beginning the first of the month after you're approved, and back pay can be paid going back to the date of your application. If you have what Social Security calls a "presumptive disability" -- such as total blindness or an amputation of your leg at the hip -- then you can qualify to get payments while Social Security is processing your claim.

For SSDI, payments start five months after your established disability date, but no more than one year prior to your application date. In other words, if you were disabled on Feb. 1, 2015, but didn't apply until March 1, 2015, your five-month waiting period to start collecting benefits starts on Feb. 1, 2015. If, on the other hand, you were disabled on Feb. 1, 2013, but didn't apply until March 1, 2015, you'd only qualify for back-pay benefits for as far back as March 1, 2014.

Additionally, while SSI payments are made on the first of the month, SSDI payments are made based on the Social Security payment schedule. If you've been receiving benefits since before 1997, then your payment should arrive by the third of every month. For newer recipients, then it depends on the day of the month of your birthday:

  • Between the 1st and the 10th: First Wednesday of the month
  • Between the 11th and the 20th: Second Wednesday of the month
  • Between the 21st and the 31st: Third Wednesday of the month 

How much can you receive?
For SSI, the maximum payment you can receive in 2015 is $733 per month if you're single or $1,100 if you're married. The amount adjusts each year as part of the Social Security Cost of Living Adjustment, and your payment would be reduced by any countable income you receive. You are also generally enrolled in Medicaid once you start receiving SSI. 

For SSDI, your payment would be based on your lifetime earnings, much like a traditional Social Security retirement benefit. The maximum current benefit amount is around $2,663 per month, and payments are adjusted as part of Social Security's Cost of Living Adjustment. As of August 2015, the average payment was $1,165 per month to a disabled person and about $318 to that disabled person's spouse.

Additionally, you get automatically enrolled in Medicare parts A and B after two years of receiving SSDI payments, and you can enroll in the other parts as well. 

What else can you do to protect yourself?
SSI and SSDI disability payments are intended to guard against abject poverty for a person who is permanently disabled and unable to work. They are not intended to replace your entire working salary and benefits package -- or to provide you with a lavish lifestyle.

If you're concerned about becoming disabled and losing the ability to support your family, then you should also consider buying disability insurance. It's frequently offered as an employee benefit, it may provide substantially better coverage than SSI or SSDI, and it could provide you with both short-term and long-term protection. As with most insurance, however, the time to get it is before you need it, as you generally can't sign up for the coverage if you're already disabled.

If you have private disability insurance, then you can collect from both that private insurance and SSDI at the same time. Additionally, if your disability was caused by a workplace injury, you can receive workplace compensation, but the total you receive cannot exceed 80% of your predisability average wages. Private disability insurance benefits are not excluded as income under SSI, however, and as such, those payments would reduce any SSI payment you would otherwise be eligible to receive.

Take care of yourself and your family
Applying for disability benefits may be one of the most complicated processes you could ever have to face. By being prepared in advance, knowing the limitations of the government programs, saving up for the proverbial rainy day, and protecting yourself with private coverage, you can set yourself up to successfully navigate those choppy seas. The better prepared you are financially for the possibility of disability, the better you can focus your energies on overcoming it, should something happen to you.

Chuck Saletta has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.