My name is Paul Badame and I am a Social Security Disability attorney with the law firm of Rubin & Badame, Norristown, PA. Today we're going to talk about the two types of programs that the federal government offers when it comes to disability. The first program is called SSDI and the second program is called SSI.
SSDI stands for Social Security Disability Insurance. SSI stands for Supplemental Security Income. A person is eligible to apply for SSDI if they have enough work credits throughout their lifetime and within the past 10 years.
You need 40 work credits throughout your lifetime. And 20 of those 40 credits must have been within the past 10 years. How does an individual obtain work credits and how many work credits can you earn in a year? The maximum amount of work credits that a person can earn in a year is four.
Work credits and earnings
So how do you earn work credits? In 2020, for every $1,410 a person earned they get one credit. If you multiply that by four, you get approximately $5,640. To get four credits in this particular year, you only have to earn a little over $5,600. Going back each year, it goes up a little bit more, but as long as you earned that amount during five of the last 10 years, you are eligible to apply for SSDI.
In reality, that's not a lot of money that we're talking about. If that's all that you earned, then your monthly benefit which is called your PIA, your primary insurance amount, is going to be very low, probably $300 or $400 or $500 a month. Now, one of the first things people ask me is, well, what's the maximum I can earn with SSDI?
In 2020, the maximum amount that a person can earn is a little over $3,000 a month. Now, in order to be eligible to receive that amount of money, you basically would have needed to max out your social security payments for the past 15 to 20 years.
That means that when you earn $137,000 during the year at that point in time, at least for 2020, you start paying FICA taxes and you're maxed out for that year. Going back in time and going forward, if you get that maximum amount of over $3,000, you really have had to earn a lot of money over a long period of time.
Earning credits through self-employment
The other way a person can accumulate these work credits is through self-employment. Now, if you own your own business or you're an independent contractor, make sure that you pay your taxes and hopefully you earn some profit.
If you break even and don't show any profit, then your earnings for that year are going to be zero and you get no work credits. If you do earn a profit for that year and it's over $5,640, like we talked about earlier, you need to pay whatever taxes you would owe. When you're self-employed, or when you're an independent contractor, it's called self-employment taxes. Once you pay those taxes, you get your credits for that year. That's how you obtain SSDI.
SSI stands for Supplemental Security Income. SSI is for individuals that either never worked or never worked on the books, i.e., they worked under the table, didn't pay taxes or stopped working a long time ago and their credits expired. They may also have a spotty work record where they earn some amount in this year, none for two years, so on and so forth.
Which is better?
So, which is better? Obviously SSDI is better. The average person that's on SSDI receives approximately about $1,300 or $1,400 a month. Again, that's based upon your past earnings. The maximum amount, and this is if everything goes right, that a person can get in 2020 for SSI is $783. So obviously, the first benefit with SSDI is that you almost all the time would receive more money per month.
SSI is needs based
Another big difference with SSI and SSDI is that SSI is needs based. They count your resources. So for SSI, your countable resources cannot exceed $2,000. If you own a house and if you own one car, no matter how much they're worth, they don't count as the countable resources. All of your other assets, even if it's an old bank account somewhere, if it's an old US bond, you have, the total amount of those other assets cannot exceed $2,000.
If your assets exceed $2,000, you are ineligible for SSI. Your case will be stopped right there. If you already receive SSI, your benefits would stop until you're under that limit. With SSDI, there is no limit on your assets, so you could have a million dollars in the bank. You could win the lottery for a hundred million, and it would not affect your SSDI benefits. You earned them, and you paid into the system. They are your credits.
Deductions for earned income
There's another aspect to SSI: If you have earned income, or if you're legally married and your spouse is working and earning money, it could make you ineligible as well. For example, let's say you get a part-time job and you're earning $600 a month. The first $100 doesn't count, and this is for SSI, so that leaves $500. They take 50% of that $500, which is $250, and it's subtracted from your SSI benefits.
If you're on the max, which is $783, minus $250, that would be your new benefit. Basically, you get penalized for working, which really stinks. With SSDI, you don't get penalized. So if you're earning $600, $700, or $800 dollars a month and you're on SSDI, and let's say your SSDI benefit is $1,900 dollars a month, it does not affect your SSDI benefits, whether it's your income or your spouse's income.
If you're married and your spouse is working, it works the same way. For SSDI, your spouse can make a million dollars a year and it does not affect your benefits at all. They are your benefits. You paid into the system, they're yours, and that doesn't affect it.
The value of food and shelter
Another big benefit, or another detriment we should say, for SSI is the value of food and shelter. If you're living with your parents or you're living somewhere for free, you get penalized for that. In 2020, if you're living, let's say, on your friend's couch for free, or if you're living in your parents' basement, you get penalized about $246 a month for what's called the fee value of food and shelter. This means that money will be deducted from your SSI for the value of food and shelter.
But if you get SSDI, you don't get penalized. So if you are living with your parents, if you're living on somebody's couch, if you live somewhere for free, they don't take any money for that. And there are a number of other benefits for SSDI over SSI, and one of them is what is called the derivative benefit.
With SSI, if you have children, let's say you have two or three minor children, whatever your SSI benefit is, if it's $783, that's it. For SSDI you can get extra money for your children. For example, let's say your benefit for SSDI is, and I use an easy number, $1,600 per month. For example, you may have a minor child and the minor child is either under 18 or they haven't graduated from high school yet. But usually it's at age 18 where it cuts off.
You would get an additional 50% for your child. So you would get your $1,600 plus another $800 for your child. Now, whether you have one minor child or 10, it's still the same. It's just 50%, but that 50% is divided up between the kids. So you would get your $1,600 plus another $800, which would come to $2,400 a month, until your youngest child turns 18 or graduates high school, whichever happens last.
And one more thing I wanted to add for SSDI versus SSI: retroactivity. For SSDI, if you stopped working a year and a half before you apply for SSDI, you can get paid a year retroactively, that's 12 months retroactive from when you filed.
For example, let's say you qualify for a year of retroactivity. Your monthly benefit is $1,000 a month. You would get a $12,000 retroactive lump sum payment for SSDI. And that also applies to the derivative benefits. Let's say you're getting half that, i.e., $500, for the kids. That would also go retroactive for one year if you're eligible for that one year of retroactivity.
For SSI, there is no retroactivity. The day that you file, actually the month after the day that you file, for example, if you filed on September 25th of 2020, your protective filing date is the date you're approved for SSI, six, seven months later, it would only go retroactive to that following month from when you applied. So it'd be October 1st of 2020. So if you were disabled two, three years prior to that for SSI, there is no retroactivity. Of these two programs, SSDI versus SSI, SSDI is much better than SSI.