What do you think of when you hear the phrase, “Social Security?” To most people, this refers to the monthly retirement benefits they can draw from the federal government starting as early as age 62. “Disability,” on the other hand, are payments the Social Security Administration (SSA) makes to individuals who are unable to work. They can occur at any age, provided you meet the eligibility requirements to qualify as disabled. These disability payments can come from two federal programs:
- Supplemental Security Income (SSI), or
- Social Security Disability Insurance (SSDI)
Yet other people say “Social Security” when they refer to the government agency itself (i.e., the SSA). Things can get even more confusing when you realize that the SSA manages both federal disability programs. Plus, there are two different payments the SSA sends out each month that start with both words:
- Social Security Disability Insurance (SSDI)
- Social Security retirement
Let’s take a closer look at the agency, its programs, and how to differentiate them all from one another below.
Understanding the Difference Between SSI and SSDI
- SSI pays disability benefits only to people with very few resources or assets and little to no recent work history. A good example would be stay-at-home parents.
- SSDI is for people who worked for at least 10 years while “paying into” the program via payroll taxes, thereby “insuring” themselves.
Health problems force people to retire early sometimes. If you can’t work because of a health condition, illness, or injury, consider applying for Social Security disability benefits. Your monthly SSDI amount will be the same as a full, unreduced retirement benefit.
IMPORTANT: If you’re getting SSDI when you reach full retirement age, the SSA simply converts those payments to retirement benefits. You don’t have to file any paperwork or do anything; this switch in payments is automatic.
Did You Know?
One in six people in the United States – or about 15% of the population – collects some form of Social Security each month. That’s about 60 million recipients. Social Security is not, in fact, just a retirement benefit. It can also pay benefits to those who cannot work earlier on in life and their dependents. Here are some additional fast facts about Social Security:
- The program began in 1935, when President Franklin D. Roosevelt signed the Social Security Act into law. Roosevelt signed many new laws in order to combat the widespread poverty and suffering of The Great Depression.
- That law’s main goal was to provide financial aid for children, the unemployed, and America’s elderly.
- The program is entirely self-funded via payroll taxes and interest earned from the trust fund’s investments in U.S. Treasury securities.
- Your age when you choose to start drawing payments and your average income earned over a 35-year work history determine your monthly benefit amount.
- The monthly amount you receive in benefits can increase by up to 8% each year between ages 62 and 70. So, if you can choose to wait to receive those benefits, it will maximize your income once you stop working.
It’s wise to speak to a Social Security expert advocate, however, about your unique situation.
Where Does the Money for Social Security Benefits Come From?
They are funded by you, the worker. The money that pays for both Social Security disability and retirement benefits comes from two separate trust funds. Both trusts are funded by a FICA tax that equals 15.3% of your earnings. These are split between employees and employers. (This also means that self-employed people have to pay the whole payroll tax themselves.) You may feel like you’d probably never need to rely on disability benefits, but it’s more common than you may realize. According to the SSA, 1 in 4 20-year-old workers today will develop a disability before reaching full retirement age.
IMPORTANT: If you are at least 62 years old and disabled, you may want to apply for SSDI instead of early retirement. Why? Because at age 62, early retirement only pays 75% of your full benefit. Worse, that monthly pay reduction is permanent and you have no way to reverse or easily increase it. SSDI pays 100% of your full retirement benefit – even at age 62. You should apply for disability benefits as soon as your health forces you to stop working, if possible. That’s because it takes 3-6 months, on average, to process your SSDI claim.
Who Qualifies for Social Security Retirement, and How Much Money Can You Get?
Anyone who works a certain number of years while paying into the system qualifies. When you work and pay Social Security payroll taxes, you earn “credits” toward those benefits. If you were born in 1929 or later, you need 40 credits to qualify for benefits, which is 10 years of work. If you stop working before you have enough credits to qualify for benefits, the credits stay on your Social Security record. You can also add to them at any time once you start working again. However, you won’t receive retirement benefits until you earn the required number of credits and are at least 62 years old.
You can get an estimate of your personal retirement benefits online. You can also see how much money you could receive each month based on when you choose to retire. Create your personal “mySocialSecurity account” at www.ssa.gov/myaccount. To sign up and create your account, you’ll need to enter a valid:
- Social Security number (SSN),
- U.S. mailing address, AND
- Email address.
You May Qualify for Legal Assistance
Applying for retirement or disability benefits and trying to find the best medical treatment or financial advice at the same time can feel overwhelming. If you need help, talk to an experienced Social Security attorney for free over the phone. Having a lawyer file your paperwork makes the process much easier.
Disability lawyers in every state work on contingency, so you’ll pay nothing for claim help up front. In fact, you’re 3x more likely to get disability benefits if a Social Security attorney files your paperwork. If the SSA doesn’t award you benefits, then your lawyer gets $0 in payment for helping you.
To speak with a local attorney in our network about your situation and get free claim help by phone, click the button below now:
Laura Schaefer is the author of The Teashop Girls, The Secret Ingredient, and Littler Women: A Modern Retelling. She is also an active co-author or ghostwriter of several nonfiction books on personal and business development. Laura currently lives in Windermere, Florida with her husband and daughter and works with clients all over the world. Visit her online at lauraschaeferwriter.com and linkedin.com.