 Personal Finance PowerPoint Presentation Social Security Disability Insurance SSDI. Prepare to get financially fit by practicing personal finance. Insurance is part of our long-term risk mitigation strategy where we follow the adage of measure twice, cut once, put in a formal process in place, look in something like set the goals, develop a plan to reach them, put that plan in action, review the result and repeat the process periodically. Most of this information can be found at Investopedia Social Security Disability Insurance SSDI, which you can find online. Take a look at the references, resources, continue your research from there. This is by Elise Bell published March 31st, 2022. In prior presentations we've been looking at insurance in general, going to the medical insurance and now we're thinking about the disability insurance basically and the different components of it, long-term disability, short-term disability and the kinds of insurance that might be provided say through an employer for example and possibly by the government versus those kind of things that you might be providing on yourself so we can kind of think about the different components and how we can piece them together with our risk mitigation strategy. So now we're talking about the Social Security Disability Insurance otherwise known as SSDI. What is it? Social Security Disability Insurance SSDI as a federal income benefits program that provides financial assistance to Americans with disabilities. So it's kind of like an insurance type of program but instead of us purchasing it from a private company this is a federal program the SSDI. In general according to the Social Security Administration that's the SSA, benefits are paid to those who are not able to work for a year or longer as a result of a disability. So that's going to be a type of disability insurance of course. So this is of course part of the risk mitigation strategies and remember it's kind of in a similar category as other types of insurance like we think about the normal kinds of insurance property insurance we think of the liability insurance or life insurance for example we're trying to safeguard against something that we hope will not happen in the future oftentimes the probability of it happening hopefully being fairly low but if it did happen it would have a significant financial impact such as our home burning down or us being sued for millions of dollars or us dying prematurely and therefore we're going to try to ensure against that risk. When you're talking about the work the types of disability insurance kind of items now you're thinking about the workflow that you have and again you're hoping that you don't have any disability problems and continue to depend on the salary that you're getting but you want to be able to insure against that in some way that's the risk that we're trying to mitigate and we can think about the short term kinds of insurance against that and if there's a long term kind of disability a long term disability is more akin to or close to what we might think about as like classic type of insurance where there might be a big financial catastrophe that could happen that we're trying to basically safeguard against hoping that it doesn't actually happen on the short term kind of disability side of things if we have a short term problem and a cut in our workflow hopefully we can self insure against that at least to some degree by having savings sufficient to kind of self insure against an issue like that hopefully. So in any case here we go payments are provided monthly to those who qualify so SSDI is an earned benefit meaning that in order to qualify you must have previously paid into the program and have accumulated enough credits to be eligible credits are dependent on work history so this is going to be something as part of the whole payroll kind of tax system that you would be eligible for because you're paying into the system so if you haven't been paying into the system then in general the idea would be that you wouldn't have any SSDI benefits in that instance so if you had no work history and you hadn't been paying anything into it then you might not have access to the SSDI. SSDI is a type of disability insurance eligibility is also based on the SSAs social security administrations medical criteria and determine through an application process understanding social security disability insurance SSDI SSDI is a social security program for people who are unable to work due to disability. Now when you're thinking about the social security program remember you think about it it's thought of or talked about on two ends of it one you paying into the system the other you getting some kind of benefits out of it normally when we think about the social security we're working we're paying into it either through wages being taken out of our paycheck for payroll taxes social security Medicare and so on federal income taxes withheld or we're self-employed and we're paying the self-employment tax and paying into the social security usually when we pay the money out traditionally we think about that would happen at retirement where we might get the benefits at retirement but now we're talking about the SSDI that means the money not us putting money in we might get a benefit from it in the event that we need it for the SSDI possibly get some benefits so applicants must be a strict definition of disability in order to qualify so clearly if you're going to qualify for this and it's a government program then the question would be what has to be met in order to qualify their medical condition must be expected to last at least one year or result in death SSDI is not for partial disability or short-term disability so it's more of a long-term kind of safety net type of thing SSDI is funded from employment tax income tax so the taxes that we're paying in contributions are calculated as a percentage of employment income and deducted from all employees paychecks under the Federal Insurance Contributions Act that's FICA so FICA payroll taxes in all jobs covered by social security or paid by self-employed people so Schedule C kind of businesses paying self-employment tax on their net earnings under the Self-Employment Contributions Act that's the SECA as such qualification for SSDI is also based on work history and the amount received is based on lifetime average earnings in employment covered by social security so now you're going to think about what's going to be the calculation for the payments it's kind of confusing because I'm trying to be paying out based on it should be supplementing your income level but it's also going to be based on how much you've paid into the social security which will be influenced in part by your earnings level because if you earn more you will typically be paying more into the social security so that can obviously get a little bit complex for the calculation applicants must have worked for a certain duration in job covered by social security the calculation is based on the number of calendar quarters worked and the age at which the disability began recipients must also be U.S. citizens or have lawful alien status if they were not born in the United States SSDI payments may be affected likely reduced if an individual or their family is also receiving other government benefits such as public disability benefits some pensions or workers compensation so it's kind of like you can remember these kind of programs like the SSDI and social security in general as well as like Medicare when we first put them in place it was kind of thought that these would be safety net type of programs and this is important for our personal planning as well as as well as just how we're going to vote or how we want to think about these kind of things as a country are these going to be safety net programs are they kind of more welfare programs to help people that kind of fall through the cracks and aren't able to earn for themselves or are they something that's going to be basically for everyone is this is this a program that everybody participates in so social security in general more and more people expect to get to receive social security as part of their basically retirement planning as opposed to people that just need the social security because they weren't able to do the retirement planning and so you have a similar thing with the SSDI is it something that we're going to everybody can kind of depend on as a kind of insurance more of a long term kind of insurance kind of thing or is it more of a welfare kind of thing and obviously that means it's going to be dependent in part on other benefits that that you might be receiving as well and one of the downsides of some of these kind of programs are that you know you want to do well you don't want to try to be aiming you don't want to welfare program to force people to aim to not earn income because because then they lose their benefits and that's kind of one of the problems and the gifts and takes when we look at these kind of programs and the incentives that they provide so SSDI beneficiaries are also automatically enrolled in Medicare Parts A and B after two years of receiving benefits we talked about Medicare in the past so if you're in the disabled area Medicare usually doesn't kick in until after a certain age 65 I believe but if you're disabled and you're getting the SSDI then the Medicare might might kick in as well so whether or not SSDI benefits are taxable depends on your income so they so then of course then the question is well I'm getting money is that a taxable event and that might depend on basically your income level if you're below a certain threshold then it might not be a taxable so a history of SSDI Social Security began in the 1930s as part of the Flink Franklin Roosevelt's New Deal reforms but initially began only with a retirement benefits program with disability and medical coverage following in the 1950s and 60s so a lot of these big government programs started at this time the 1930s when we had of course the depression that was happening at that point of time which was really bad and then of course the there was a war at the end that and so there's arguments in terms of what kind of pulled us out of that downturn in the Great Depression but in the meantime the Franklin Roosevelt and the administration were trying to do anything just to do something it seems like so they made a whole lot of of laws many of them didn't stick many economists would argue that they were not helpful and possibly possibly harmful to the economy many of the laws but some of them you know stuck through and some of the you know the big ones here Social Security obviously one of the big ones that are remnant from that time period so then then they adjusted it for in the 1950s and 60s of course expanding it in the 1950s the Disability Insurance Trust Fund the DI was established to collect funds under the Federal Insurance Contributions Act that's FICA and Self-Employment Contributions Act SECA for the self-employed for the Schedule C sole proprietors for example from which SSDI payments are made okay so SSDI application process the application process comprises the following general steps so the applicant gathers to require documentation and information for the application the SSA Social Security Administration that is has a checklist on their website so you can go to the Social Security Administration website take a look at their checklist and that can assist the process the applicant completes and submits their application the SSA reviews the application to ensure that the work and disability requirements are met if there are any questions the SSA the Social Security Administration will contact the applicant and request additional information or documentation documents the application is processed and sent to the applicant's state disability determination services office and the state agency determines whether the application is successful the applicant receives a letter in the mail regarding the decision the decision can be appealed in writing within 60 days of receiving the decision so if you want to say your decision is wrong then you can appeal it possibly so the SSA recommends applying for disability benefits as soon as you become disabled this is especially important because if an SSDI application is approved most beneficiaries with the exception of those with ALS must wait five months to receive their first payment so remember this is more kind of a long term disability thing so it's not really designed so much to get the money out right away for the month to month that's more of the worker's compensation is helping out with that and hopefully we have our own self insurance to some degree to be able to survive a few payrolls without money that would be ideal if we could and then this would be the more the long term kind of insurance that might kick in but that of course means that you want to do the application process as soon as you think it might be something that you would need because it'll take a while to process it's a big company or big administration type of process as a result the first payment would be made in the sixth full month after the date that the disability began according to the application qualifying for SSDI in general in order to qualify for SSDI you must meet the following criteria you are unable to work and engage in substantial gainful activity as GA due to your medical situation you are not able to conduct the type of work you did before or you are not able to do any other type of work as a result of your disability your condition has had or is expected to have a duration of at least 12 months or to result in death so note that there are special considerations and slightly different eligibility criteria for people who are blind widows or widowers of workers, children with disabilities and veterans so in line with the above the state agency makes its decision using these five questions moving through them in consecutive order so number one are you working if yes and you make an on average over a certain monthly figure in general you will not be considered to have a disability so obviously if you're able to do the work you would think that you're not going to just be disabled this is one of the sad things about this kind of insurance and we would like to not have these kind of bars over our head limiting us from kind of working and that's kind of what ends up happening with some of these programs because if you start making money over a certain level then you would expect that you're going to lose the benefits which you might be dependent on and therefore you're going to not try to work over a certain level and so on so that's just kind of one of the downsides to some of these social programs so the amount changes annually and is also referred to as substantial gainful activity that's the SGA so if not or you make less than the SGA threshold then the agency moves to evaluate step two or number two is your medical condition is it severe under the SSA's definition disability your ability to do basic work activities must be significantly limited for at least 12 months these include walking, sitting, standing lifting and remembering if not you won't be considered to have a disability if your condition is considered severe under these criteria the agency moves to evaluate step three number three does your medical condition meet or medically equal a listing the SSA uses a listing of medical conditions that has been created in consolidation with the medical expert so they got to put you in a category or else they don't know what to do you know how the government does that they try to put everybody in some kind of category that's you we've defined you by this thing here we go these conditions are considered severe enough to prevent someone from being able to carry out work activities the state uses this list to determine if you have a disability by confirming if your condition meets or is equal in severity and duration to a listing and its criteria if this is not the case the state continues to step four of the evaluation number four can you do the work you did before this stage of the evaluation determines whether you are able to continue on with any of your past work given your medical situation if your medical situation does not prevent this the state will determine that you do not have a disability that qualifies for SSDI because the point is that they might get the benefit because you can't do the work but if you can do the work then you can still earn money so if your medical situation does interfere with the ability to carry out past work activities the evaluation moves to step number five number five can you do any other type of work at the final stage of the evaluation the state considers whether you are able to carry out other types of work based on age education past work experience and skills if they find you are able to do other work you will not qualify for SSDI if they find that you are not able to do other work you will be considered to have a qualifying disability SSDI payment schedules payments are made the month after for which the benefits are due for example the benefit due for January 2022 would be paid in February 2022 since June 1997 benefits are paid monthly on the second third and fourth Wednesday of the month depending on the beneficiaries day of birth so we got the first to tenth day of birth paid on second Wednesday of the month if you are on the eleventh to twentieth day of birth paid on the third Wednesday of the month and the twenty first to the thirtieth day for thirty first day of birth you are paid on the fourth Wednesday of the month so if the Wednesday on which the payment is scheduled is a federal legal holiday the payment will be made on the first preceding non-holiday day so the day of birth used to determine the payment schedule is that of the person whose social security number is associated with the benefit program if multiple people are receiving payments associated with a single claim for instance in the case of dependence of insured people who are disabled they will share the same payment day so prior to June 1997 payments were provided on the third of each month so beneficiaries of SSDI who receive payments at that point in time remain on the same payment schedule social considerations SSDI is a federal program offering benefits only for long term disability under a strict list of defined medical conditions some states namely California, Hawaii New Jersey, New York and Rhode Island offer state funded temporary benefits for short term disability so that would be dependent on the state these are the two kind of components of the disability their eligibility guidelines and administration criteria differ by state many employers offer private disability insurance as part of the benefit package usually through commercial insurance brokers these also may allow coverage for partial disability but may require a healthy valuation before initial sign up that will usually lead to higher premiums or denial of coverage and medical condition is determined so it is possible to benefit from SSDI will also insured under a private plan however receiving SSDI payments may reduce the monthly benefits from the private insurer so now you've got talking about some overlap between other insurance and the SSDI you would think that you can't really get double you would think that the double insurance might cause you a problem getting double the benefit for the one thing that's supposed to be covering the one payroll but it would be nice to have some coverage for the short term type of thing at least until you get through the application process for the longer term insurance if possible so receiving private benefits does not impact your qualification for a benefit amount from SSDI however who is eligible for SSDI workers who are no longer able to work as a result of their disabling medical condition eligibility is based on work history using a credit system and severity of disability to qualify you generally need to have worked in jobs covered by social security for at least 5 of the past 10 years or have 40 credits 20 of which were earned in the last 10 years ending the year your disability began in some cases usually with younger workers applicants may be eligible with fewer credits you also need to meet the definition of disability as outlined by social security what's the difference between SSDI and SSI social security disability insurance SSDI and SSI supplemental security income are both administered by the social security administration the SSI provides monthly payments to people below a certain income and resource threshold and eligibility is not based on work history people aged 65 and older who do not have a disability are also eligible for SSI if they meet the financial criteria SSI is funded by the general tax revenues rather than social security tax what are some changes to SSDI for 2022 for beneficiaries in 2022 the social security administration the SSA announced a 5.9% cost of living adjustment C.O.L.A to all social security monthly payments the biggest adjustment since 1982 the maximum SSDI benefit for 2022 is estimated at $1,358 per month to eligible individuals for taxpayers the maximum taxable earnings increased to $147,000 meaning that the social security tax remaining the same in 2022 as it was in 2021 at 6.2% is contributed from all income up to that amount so in other words when you're putting the money in to the social security it gets capped out at that $147,000 and then you don't pay your percent the percent above that amount and a lot of people ask why would that be that means if you earn a whole lot of money you're not putting more money into the program and again it has to do with this idea of are we talking about something with social security that is a safety net program that's supposed to be paying out for people that really need it or it looks like it's going more and more towards it's a benefit program that everybody basically gets access to meaning the more money that you put into it the more benefit you should get basically at retirement or whenever you need the payouts that are coming out of the social security and after your income goes above a certain threshold you're no longer adding to the calculation kind of like your benefit calculation that you would have that would be part of the rationale for that in any case the substantial gainful activity SGA amount for 2022 increased to $1,340 per month as compared to $2,310 per month in 2021 for non-blind beneficiaries and $2,260 per month for blind beneficiaries as compared to $2,190 per month in 2021