The Social Security Administration (SSA), the federal agency that is best known for administering retirement benefits to older Americans, is also a potential source of disability benefits. In fact, more than $4 billion in Social Security disability payments are sent to 7 million Americans each month. The more important figure, however, is what the average person can expect to receive. Currently, the average monthly payment for a disabled worker is $817, or just slightly greater than the poverty guidelines. In addition to only replacing a limited portion of the average person's salary, the qualifications to receive benefits from Social Security Disability Insurance are very strict. Consider the following:
- 70 percent of those who apply for Social Security disability benefits are denied.
- Eligibility is based on being unable to perform any gainful employment; not just the job you were performing at the time the disability began.
- You are eligible for benefits after you have been disabled for 5 months and if the disability is expected to last 12 months or to result in death. Claim processing may take up to 3 months.
- Benefit levels are limited based on the number of eligible quarters a person has paid into the Social Security program.
- Social Security payments may be reduced by disability entitlements under other government programs, including government pensions, workers' compensation, civil service, and military programs.
- Social Security disability payments are subject to federal income tax if your "combined income" adjusted gross income plus any nontaxable interest income and half of your Social Security benefits exceed $25,000 per year.
This is not to say that disability benefits through Social Security are unimportant and can't ever be relied on if you become disabled and are unable to work. But it's important to understand that benefit payments tend to be modest and most people won't qualify for benefits. So if you or your loved ones would face financial adversity if a disability were to sideline you from work for a period of time, make sure you have more than just Social Security on which you can turn to for replacement income.