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Understanding Social Security Statement for Disability Financial Planning

  • Published: 2009-05-18 (Revised/Updated 2013-06-17) : Author: Allsup
  • Synopsis: Knowing how much Social Security disability benefits you might expect is an important first-step in sound financial planning.

Quote: "You can be eligible for benefits six months after becoming disabled. However, the award process can take quite a bit longer because the SSA is dealing with a backlog of disability cases."

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Understanding Your Social Security Statement Is Essential for Disability Financial Planning, Allsup Says.

Knowing how much Social Security disability benefits you might expect is an important first-step in sound financial planning

Nearly 10 years ago, the Social Security Administration (SSA) began mailing out annual Social Security statements detailing retirement and disability benefits to more than 100 million workers each year. Today, many people still don't understand their eligibility for Social Security disability benefits, according to Allsup, a leading provider of Social Security disability, financial and healthcare-related services to people with disabilities.

Yet nearly one in four people in their 20s today will become disabled before reaching age 67, according to SSA data. Currently, more than 9.2 million disabled workers and their family members rely on Social Security Disability Insurance (SSDI) benefits as an essential source of income.

"Many people assume SSDI benefits are automatic. They are not," said Paul Gada, financial planning director for Allsup. "They are a payroll tax-funded benefit you earn by paying into the system and meeting other guidelines. This can be a financially devastating lesson to learn if you aren't aware of it until after you suffer a disability."

Gada emphasizes that people should keep three key points in mind when they review disability-related information on their annual Social Security statements:

1. Ensure accuracy of your stated income amounts.

The third page of the statement lists "Your Earnings Record." Disability and retirement benefits are based largely on the number of years you worked and the amount of Social Security taxes you paid. Your employer is required to send the SSA a copy of your W-2 form each year, showing the Social Security taxes paid. However, the SSA may not receive your W-2, or they may enter the information incorrectly. To verify accuracy, compare the statement to your copy of your W-2.

If you spot a mistake, contact the SSA immediately; otherwise you may not receive all the Social Security benefits you are owed.

2. Understand the general SSDI requirements and eligibility as they relate to you.

On the second page of the statement, "Your Estimated Benefits" provides detail on disability benefits, including whether you have earned enough credits to qualify.

Every worker can earn up to four credits each year. Most workers must have earned 40 credits during the past 10 years to be eligible for SSDI benefits. Workers under age 31 may be eligible for disability coverage with as few as six credits in three years.

Second, the monthly payment amount shown for disability benefits is calculated as if you were to become "disabled right now." However, having a disability does not automatically qualify you for benefits because the SSDI application process can take years.

To be eligible for SSDI benefits, a person must have a physical or mental impairment expected to prevent him or her from doing substantial work for a year or more, or result in death. SSDI benefits are only available to people under retirement age (65 to 67), after which Social Security retirement benefits kick in. Allsup provides detail on additional disability guidelines, some specific to particular disabilities, at

Benefits also are not immediate. You can be eligible for benefits six months after becoming disabled. However, the award process can take quite a bit longer because the SSA is dealing with a backlog of disability cases. Some people wait two to four years for a decision on their application for benefits.

"Ultimately, you should expect up to a few years where you will have no income," said Gada. "You are going to need savings in reserve, private disability insurance or income from another source, such as your spouse, to help see you through this. The chances of becoming disabled are significant enough that you should make this part of your financial planning."

Allsup provides an overview of financial planning in its online Personal Finance guide.

3. Understand the exceptions that can reduce your SSDI benefits.

Exceptions such as the Windfall Elimination Provision (WEP) can reduce the estimated benefits listed in your Social Security statement. WEP is applied if a person also receives a pension from work and Social Security taxes were not deducted from pay. Most often, this applies to former government workers whose income was not subject to Social Security tax. In 2009, the WEP can reduce someone's maximum monthly disability benefits by $372. The SSA provides a chart on WEP's impact on benefits at

Allsup provides links from its Web site to a sample Social Security statement as well as a list of other important information needed by people preparing to apply for SSDI.

"The more informed you are about your benefits, the better prepared you can be to make sure you have a financial plan in the event you do suffer a disability," said Gada.

Reference: Allsup, Belleville, Ill., is a leading nationwide provider of financial and healthcare related services to people with disabilities. Celebrating its 25th anniversary in 2009, Allsup has helped more than 120,000 people receive their entitled Social Security Disability Insurance and Medicare benefits. Allsup employs nearly 580 professionals who deliver services directly to consumers and their families, or through their employers and long-term disability insurance carriers. For more information, visit

The information provided is not intended as a substitute for legal or other professional services. Legal or other expert assistance should be sought before making any decision that may affect your situation.

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