One out of four of today's 20-year-olds will become disabled before age 67, according to the Social Security Administration. In other words, the chance that you won't be able to work until retirement age is greater than you may think.
Fortunately, Social Security is a lot more than just a program to provide retirement income for older Americans. There's also a Social Security program that pays disability benefits based on your work history, which can provide a valuable inflation-protected income stream if you become unable to work. With that in mind, here are seven things American workers and their families should know about Social Security disability insurance.
1. There are two forms of Social Security disability insurance
Generally, when you hear someone refer to "Social Security disability," they're talking about Social Security Disability Insurance, or SSDI. This is the program designed to replace lost income if a worker who is covered by Social Security becomes disabled.
In addition, there is a program called Supplemental Security Income, or SSI, that is based on financial need, not an individual's work record. We have a separate, thorough article about the SSI program, but for the remainder of this article, you can assume that I'm referring to Social Security Disability Insurance.
2. Who is eligible for Social Security disability?
To qualify for Social Security disability benefits, two main criteria must be met.
First, you need to have worked in Social Security-covered employment for a certain amount of time. You'll need to satisfy a "duration of work" test, and the minimum requirement depends on your age. The minimum duration of work required varies from 1.5 years for workers who become disabled before age 28 to 9.5 years of work for workers who become disabled at age 60.
You'll also need to satisfy a "recent work" test. In a nutshell, you're required to have worked for half of a certain period of time (depending on your age) immediately prior to your disability. For example, if you become disabled after the age of 31, you need to have worked for five years out of the 10-year period ending with the calendar quarter when you became disabled.
Second, you need to be disabled (obviously). Specifically, Social Security disability benefits are generally paid out to people who can't work because of a medical condition that's expected to last for at least one year or result in death.
It's also important to point out that you need to be completely unable to work. There is no such thing as partial disability benefits or short-term disability benefits from Social Security.
3. How much would you get if you became disabled?
Just like with retired workers, your average Social Security-taxed earnings are used to determine your disability benefits.
In general, the amount you can expect to receive from Social Security Disability Insurance is slightly less than you could expect to receive had you worked until full retirement age. This makes sense -- after all, workers generally earn more later in their careers, so by becoming disabled before reaching peak earnings years, the Social Security formula gets skewed lower.
The data backs this up. In February 2018, the average retired worker received a Social Security benefit of $1,407.96 per month, while the average disabled worker got $1,197.14.
The most accurate way to determine how much you could get if you were to become disabled is to view your most recent Social Security statement. You'll need to create an account at www.SSA.gov if you haven't done so already, and you can then view your statement, which is packed with valuable information about your Social Security and Medicare benefits, including how much you could expect to get from disability benefits if you were to qualify for them this year.
4. What is the application process like?
The application process to file a disability claim is relatively easy, but it is slightly more complex than the 15-minute application process for Social Security retirement benefits.
You can apply for disability benefits online at www.socialsecurity.gov, and you'll need to have the following information:
- Your Social Security number
- Your birth certificate
- Medical information, such as names of doctors and hospitals where you've received care, medications you take, medical records you have, and relevant lab test results
- Details of your work history
- Your most recent W-2 or tax return
Once you've applied, there are a few other forms that need to be completed. You'll need to file a form that tells the SSA information about your medical condition, and your healthcare professionals may need to fill out forms as well. The SSA will then make a decision on whether you meet its definition of "disabled."
As you might imagine, all of this paperwork, and the subsequent evaluation of your case, takes time. The SSA advises that processing a disability benefits application can take three to five months, so if you become disabled, apply as soon as possible.
5. Some of your family members could get benefits, too
Disability benefits aren't just for people who can no longer work. In many cases, family members of disabled workers can get SSDI benefits as well. This includes:
- Your spouse, if they are at least 62 years old
- Your spouse at any age if they care for your child, who is under 16 or disabled
- Your child, who is under 18 (or under 19 if in high school)
- Your disabled child over 18, if their disability started before age 22
Keep in mind that even if you have several family members entitled to benefits if you become disabled (say, a spouse and two children), there's a maximum amount of money that can be paid out on any one worker's record. Including your own benefit, this ranges from 150% to 180% of that worker's full Social Security retirement benefit amount, and if the calculated disability benefits exceed the allowable maximum, your family members' benefits can be proportionally reduced.
6. If you get Social Security disability, you can also get Medicare early
Generally, Medicare benefits don't kick in until you turn 65. However, there's an exception for disabled workers who get benefits through Social Security. Specifically, disabled workers will get Medicare coverage automatically after receiving disability benefits for two years, and in certain cases (such as with kidney failure), they can qualify sooner.
7. You may still need disability income insurance
Social Security retirement benefits are designed to replace about 40% of the average worker's income. And since disability benefits are based on what your retirement benefit would eventually be, it's fair to say that the average worker should expect a similar level of income replacement.
The point is that while Social Security disability benefits are certainly a valuable safety net, if you become disabled, they may not be enough. Could you pay all of your living expenses and maintain your standard of living on 40% of your salary? If the answer is no, you might still need other disability income insurance to help replace your income if you happen to become disabled.