Social Security Disability:  How Are Your Earnings Calculated?

Navigating the world of Social Security Disability benefits can be overwhelming, especially when it comes to understanding how your earnings are calculated. Whether you are considering applying for disability benefits or already receiving them, knowing how your earnings are evaluated is crucial for understanding your financial situation.

Here's a breakdown of how the Social Security Administration calculates your earnings for disability benefits:

1. Average Indexed Monthly Earnings (AIME):

The first step in the calculation process is to determine your Average Indexed Monthly Earnings (AIME). The AIME is calculated by adjusting your past earnings for inflation using the Average Wage Index. This takes into account the wages you earned during specific years of your work history.

2. Primary Insurance Amount (PIA):

Once the AIME is established, it is used to calculate your Primary Insurance Amount (PIA). The PIA represents the amount you would receive if you became eligible for Social Security retirement benefits at your Full Retirement Age (FRA). The PIA is calculated by applying a formula to the AIME, which takes into consideration the bend points and percentages set by the Social Security Administration.

3. Substantial Gainful Activity (SGA):

In order to qualify for Social Security Disability benefits, you must meet the definition of disability, which includes being unable to engage in Substantial Gainful Activity (SGA). The SGA is a threshold set by the Social Security Administration to determine if your earnings are substantial enough to be considered as engaging in substantial gainful activity. For 2020, the SGA amount is $1,260 per month for non-blind individuals and $2,110 per month for blind individuals. If your earnings exceed the SGA amount, you may be ineligible for disability benefits.

4. Trial Work Period (TWP):

If you are receiving Social Security Disability benefits and want to attempt to return to work, there is a Trial Work Period (TWP) during which you can test your ability to work without losing your benefits. During the TWP, you can earn any amount without it affecting your disability benefits. However, the Social Security Administration considers months in which your earnings exceed a certain threshold as part of the TWP calculation. For 2020, any month in which you earn more than $910 is considered a trial work month.

5. Continuing Disability Review (CDR):

Even after you start receiving Social Security Disability benefits, the Social Security Administration periodically reviews your case to ensure you still meet the definition of disability. During these Continuing Disability Reviews (CDR), your earnings will be evaluated to determine if you are still eligible for benefits. If your earnings exceed the SGA amount during a CDR, your benefits may be discontinued.

Understanding how your earnings are calculated is essential when applying for Social Security Disability benefits or considering returning to work. It is crucial to stay informed about the guidelines set by the Social Security Administration to ensure you are receiving the correct amount of benefits and remain compliant with the rules and regulations.

If you have any questions or need assistance, it is beneficial to consult with a Social Security Disability attorney or a representative who can guide you through the process and provide personalized advice based on your unique circumstances.