Your Social Security payments and disability benefits are calculated using an algorithm that is an identical duplicate of one another up to the very last step. However, for the time being, we will concentrate on the process shared by both of them. In the next part, we will discuss how the two processes differ.

The first thing you need to do is compute your average indexed monthly earnings, abbreviated as AIME. The SSA will consider the 35 years you had the greatest total earnings. It will adjust your income for inflation for each of those years and include it up to the taxable limit, which is the point at which you will no longer be required to pay taxes to the Social Security Administration. This point is increased to $160,200 for the tax year 2023, up from $147,000 for the tax year 2022.

The Social Security Administration will now take these sums, add them up, and divide them to arrive at your AIME. If you have over 35 years of earning experience, the years with the least income will be disregarded. If you have less than 35 years of earnings, the Social Security Administration will subtract $0 from the computation for each year that you are short.

The last step is to get your main insurance amount (PIA) from your annual maximum exposure (AIME). The SSA will use a percentage of three portions of your AIME to compute your PIA. The year in which you turn 62 or become incapacitated will have a little role in determining how much of each of these sections you will get. If you do either of these things in 2021, the Social Security Administration will deduct 90% of the first $996, 32% of the amount between those two points, and 15% of whatever is left over. The sum in question is your PIA.

When Does Disability Pay More Than Social Security?

The amount of your PIA is determined by whether or not you meet the requirements for receiving disability payments. However, things aren't quite that straightforward regarding Social Security benefits. Even though you may start collecting Social Security payments as early as the age of 62, you won't get your primary insurance amount (PIA) until you reach your full retirement age (FRA), anywhere between the ages of 66 and 67. Your benefit amount would start at just 70% of your PIA when you reach the age of 62 and steadily increase until you achieve your FRA.

This indicates that the amount of your disability benefit would increase between the age of 62 and your FRA. Taking disability payments also comes with an added perk: if you choose to do so instead of collecting Social Security, the amount of money you get from Social Security will continue to increase.

If you become incapacitated after age 63, for example, the gap between the two groups is significantly worse. This is because your PIA for the year you turn 62 will be used to compute your Social Security payments, while your PIA for the year after you reach 62 will be used to determine your disability benefits. If your AIME remains the same or rises, then your PIA for the following year will also increase.

When Does Social Security Pay More Than Disability?

If you are between your FRA and age 70, the scenario is exactly the opposite of what was described above. When you achieve your FRA, your Social Security benefit will rise by 0.8% for each month you postpone the month you begin receiving those benefits. This will continue until you reach the age of 70, at which time the benefit you get will have reached its full potential. In this scenario, the amount of money you get from Social Security each month will be more than the amount you receive from disability each month.

SSDI vs. SSI: Which Pays More?

In addition, there is comparison of the payments received from the various kinds of disability programs that SSA manages. These are the Social Security Disability Insurance (SSDI) and SSI programs. Those who are handicapped and need help with their income are eligible for SSDI compensation. Adults with low incomes and little assets, as well as children who are handicapped, are eligible to receive SSI payments.

If you compare these two kinds of Social Security benefits, you should be aware that the SSDI benefits normally provide a higher amount of money. The benefits associated with disability in this context are, on average, more than twice as much as the benefits associated with SSI. However, the outcomes of each unique circumstance are not always predictable.