Eligibility for Social Security Disability
SSD is for workers who were on their way to normal retirement when something went wrong. They were paying taxes into Social Security through their paychecks through something called FICA, which stands for the Federal Insurance Contribution Act.
But something always happens – a car accident, an injury on the job, a heart attack. Now, instead of bringing home a paycheck, our worker can no longer work due to injury or illness. If he can prove his disability to Social Security, he is eligible to apply for SSD. This is what makes SSD like an insurance policy. Each pay period, a worker pays a certain amount into the policy through the payroll tax. It’s like an insurance policy premium. The money is supposed to protect him when he retires. But even if he can’t make it that farm that insurance coverage will be there for him.
How do the taxes work? For Social Security, most workers pay a 6.2% tax on their income. So if you make $30,000 a year, you can expect to pay about $1,860 in payroll taxes (6.2% of $30,000). If you make $60,000, your payroll taxes would be about twice as much – so about $3,720 for the year. Interestingly, for Social Security, there is no “cap” or limit on how much income can be subject to the FICA tax. Currently, for 2020, that cap is about $137,700, meaning that a person who earns $137,700 in 2020 pays the same amount toward Social Security as a Wall Street tycoon who makes $10 million. Meanwhile, for Medicare, 1.45% of a worker’s check is withheld each month. There is no cap for Medicare. For both Social Security and Medicare, these amounts are matched each month by the employer, so the total amount of your monthly earnings that go to payroll tax is actually 15.3% even though you only put in half of that.
Eligibility for SSD is not only based on how much you have contributed in any year, but how many years you have contributed. Just like whit any insurance policy, you are only covered against damage or accident for as long as you pay into the system. If the damage or accident happens before your coverage runs out, you’re all set. If, on the other hand, the accident occurs after the coverage runs out – after your insured status expires – then you have a problem. SSD is no different in this way. Your insurance with Social Security will run out after you stop working. Your insured status will expire at a certain date. WE call this the date last insured or “DLI.” You have to prove that you became disabled before your DLI. It’s that simple.
