Social Security Disability Insurance: Advantages and Disadvantages

social security disability insuranceBefore we discuss Social Security Disability Insurance, let’s talk Social Security. It is an “enforced savings” system. By law, workers – with few exceptions – must pay the so-called F.I.C.A. tax. Federal Insurance Contributions Act.

If a worker has paid enough into the system, they are “insured.” That means they can draw Social Security at Retirement (age 62 and later), Disability (if approved at any age), or Survivor’s benefits at the death of one’s spouse.

Consider this: if there was no Social Security system, none of the above would be available at critical times in one’s life. None.

How poorly run is Social Security? For every $1 ever collected, the system has created $2 of promises it can’t keep.

People confuse insurance with ‘forced-savings.’ It has a negative net worth of $32 trillion – there are no savings in the system at all. It is closer to forced spending.

Advantages of Qualifying for SSDI (Social Security Disability Insurance)

Thousands of disabled Americans who don’t know the answer to that question are shortchanging themselves. And so are employers who do not realize the lack of Social Security qualification is costing them a larger share of their employees’ disability benefits than necessary.

You can receive a portion of your latest income if you get disabled. This can help pay for your monthly bills and daily needs. This way you can avoid unwanted situations like foreclosures and the prospect of having to file for bankruptcy in case you are unable to earn an income due to disability.

With disability insurance, you’re able to have a complete set of protection for your income. You need to protect your income to make sure that your family can still have your needs even at your death or disability. Disability insurance is also important since one may survive a catastrophic event such as an accident or a serious illness but be left with the disability.

Increased Monthly Income

Long-term disability benefits or disability pensions from an employer or insurance company are generally not adjusted for inflation. However, Social Security disability benefits increase when Social Security cost-of-living adjustments are made. When the Consumer Price Index increases a certain percentage, Social Security benefits follow. However, the monthly benefit amount from an employer plan generally remains the same.

If a disabled employee currently receives $ 1,000 monthly from an employer, 10 years from now that employee will still receive a $1,000 monthly payment regardless of inflation.

Increased Retirement And Survivors Benefits

Social Security disability entitlement “freezes” a person’s Social Security earnings record.

In other words, the time during which a person receives Social Security disability benefits is not counted as a time the person is employed. With employer or insurance company plans, this isn’t the case. This is important because of future benefits: Social Security retirement benefits, dependents; benefits or even subsequent disability or survivors. Benefits are computed based on a person’s average earnings during a period of time.

Tax-Free Income

This advantage is contingent upon how a premium is originally paid on long-term disability benefits.

For example, if a person pays the premium during working years out of post-tax dollars, then the long-term disability benefit isn’t taxable when received. If a person did not pay the premium (but was paid by another source), or if the person paid the premium out of pre-tax dollars, then the long-term disability benefit is taxable when received.

SSDI benefits

The biggest benefit of getting SSDI benefits is that you will get a monthly cash payment that you can use to provide for your daily necessities. If you are unable to work than SSDI may be the only way you can provide food, shelter, and clothing for your family.

Another benefit of Social Security Disability Insurance (SSDI) is you will get Medicare 24 months from the date of your disability. Medicare will provide medical insurance for you, which means you will be able to get the proper medical assistance you need, including medication, for your health condition. For many SSDI applicants, the medical insurance portion of the SSDI benefit may be the most important. Many disability applicants may never have had health insurance when they were working and this might be the first time they will have adequate medical care.

Disadvantages of Social Security Disability

Social Security Disability Insurance (SSDI) provides income support to those completely unable to work due to a disability. Despite the benefits of SSDI, it has certain limitations that must be taken into consideration when preparing to apply for and be on the program. Being aware of these disadvantages will help you to manage your family’s budget during the time you are disabled.

You must contend with the waiting period. The waiting period is anything between one month to three months. During this period, you will have to dig into your savings and find other sources to provide for the needs of your household.

The disability insurance payments will only pay for a limited number of months: twelve to twenty-four months for short term disability insurance and two to five years for long-term disability insurance.

When you are not the breadwinner and if the other members of your household have enough income to fulfill the needs of the household, then you may not need the disability insurance.

Proof of Disability

Unlike other government programs, SSDI (Social Security Disability Insurance) does not give benefits for partial disability. You must be completely unable to work because of your condition to qualify. This means you must be unable to perform the work you had been doing, and be unable to adjust to new work. Your disability must also be severe enough to be expected to last at least one year or to result in death.

Past Work History Required

You must have earned 40 Social Security credits to qualify for SSDI (Social Security Disability Insurance) coverage, and 20 of those credits must have been earned within the past 10 years. A credit is also called a “Quarter of Coverage” by Social Security and is accumulated at a maximum of four per year based on your earnings. The amount you need to earn to get one credit changes every year according to the national average wage index. In 2010, this amount was $1,120. This means that annual earnings of $4,480 would earn you four credits. No matter how much you earn in one year, you can earn no more than four credits.

Delay in Benefits and Case Reviews

Benefits do not begin until you have been disabled for at least five full months. This means you’ll not receive any SSDI payment until at least your six months of being disabled, and possibly longer. You will be notified of the start date of your benefits and the benefits amount when your application for SSDI is approved. Once benefits begin they last as long as you’re disabled. However, your case will be reviewed regularly to ensure that you do in fact remain disabled as long as you are still on SSDI benefits.

Benefits Can Be Taxed

Benefits are taxable if your overall income is above a certain amount. In 2010, that amount was $25,000 for an individual and $32,000 for a couple. The Social Security Administration estimates that about one-third of SSDI recipients pay tax on their benefits.

Cons of Getting SSDI

If you are applying for SSDI (Social Security Disability Insurance) you should be to the point where you can no longer work and the cons will probably be irrelevant, but there are some negatives for getting SSDI. The most common issue is that many people feel guilty about being taken advantage of the system. Others want to work part-time but can’t because it could jeopardize their SSDI benefits (you may be able to work part-time but talk to the SSA before you do).

Disability applicants who are in pain and are unable to work also complain about feeling “unproductive,” and depressed, but this most likely has less to do with the fact they are getting SSDI and more about living with a disabling health condition which limits their activities.

Additionally, parents often talk about the stigma that a child may face if they are receiving SSI benefits. Labeling a child as disabled may not always be beneficial for that child, although getting medical care may outweigh this concern for most parents.

Read More:  Social Security Disability Denial Help

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