One out of every four 20-year-olds will become disabled before reaching retirement age, according to Social Security Administration statistics. Would you or your family be prepared?
The Social Security Administration has two major programs that provide benefits to disabled individuals: Social Security Disability Insurance (“SSDI”) and Supplemental Security Income (“SSI”).
SSDI is similar to an insurance policy. Generally, when you work, your employer withholds FICA (Federal Insurance Contribution Act) taxes from your paycheck. These taxes allow you to earn credits. Once you have accumulated sufficient credits, you will become “insured” for social security purposes. If you become disabled, the amount of your monthly disability benefits is based on your Social Security earning record.
SSDI comes with Medicare, a federal health insurance program available to people over 65 and some disabled individuals. It has four parts, two of which are important to individuals with disabilities: hospital insurance and medical insurance. The hospital insurance was financed by the Medicare tax withheld from employment, so there is no an additional premium for this coverage. However, the medical insurance, which covers doctor’s visits, requires payment of an additional premium that is deducted from Social Security checks. The Social Security Administration will automatically enroll disabled individuals in the Medicare program 24 months after the first month eligible to receive SSDI (Note: this is calculated from the first month of entitlement, not the first month a check is received).
The second program, SSI, pays disabled individuals on the basis of financial need, regardless of work history. The monthly payment will vary, but is capped at a maximum federal benefit rate, currently $783 per month.
SSI comes with Medicaid, a program that is funded by the Federal Government and the State jointly to help low-income families. Entitlement usually begins the same month of eligibility for Supplemental Security Income, but in some situations it can be retroactive for up to three months.
While the above two programs may provide a security net, in 2019, Social Security only paid an average monthly disability benefit of about $1,234 to all disabled workers. That is barely enough to keep a person above the 2019 poverty level ($12,490 annually). Thus, you need to know whether your family would have enough support in a crisis.
Social security allows you to monitor your disability insurance policy at: www.ssa.gov/myaccount/. Find out how much your benefits will be should you become disabled, when your insurance runs out, and whether you need private disability insurance.