By: Jerry Love, CPA/PFS, ABV, CVA, CFP | According to the Social Security Administration’s Fact Sheet in February of 2013, 25% of the 25-year-olds today will become disabled before they retire. Further, according to the US Census Bureau survey in 2011, approximately 12% of the US population is classified as disabled. Of this estimated 37 million, over half are between the ages of 18 and 64. According to the US Social Security Administration’s report on Disabled Worker Beneficiary Data in December 2012, 8.8 million of these disabled wage earners were receiving some amount of Social Security Disability Income (SSDI).
It is estimated that only about 12.5% of workers will be disabled for five or more years during their working career. Many articles have been written that imply unemployment is higher among those who are disabled than the general workforce. Some suggest that unemployment is around 14% for those with a disability. It has also been indicated that many of those who cannot find a job, then turn to the government for assistance and apply for SSDI.
According to Council for Disability Awareness Long-Term Disability Claims Review 2012, the leading causes of new disability claims were musculoskeletal/connective tissue disorders (28.5%), cancer (14.6%), injuries and poisoning (10.6%), mental disorders (8.9%), and cardiovascular/circulatory disorders (8.2%). The study further states that 90% of disabilities are caused by illness rather than accidents.
A large majority of families in America are dependent upon both spouses working. According to the U.S. Federal Reserve Board Survey of Consumer Finances 2010, 48% of American households report that they do not save money annually. Furthermore, 68% of these families report they have no saving earmarked for emergencies. Additionally, according to Council for Disability Awareness Disability Divide Consumer Disability Awareness Study 2010, two thirds of American families report they could not cover normal living expenses for as much as a year if they lost their jobs. In fact, 38% say they could not pay their bills for more than three months.
The Census Bureau reported that in 2012, the median annual earnings of all full-time, full-year workers between ages 25-34 is $37,950. Contrast that with the average SSDI payment of $13,560 ($1,130 per month). This reinforces the fundamental principal that families need to develop their own financial plans for contingencies that may be critical to their financial well-being. SSDI, just like Social Security retirement benefits, was not designed to be your only source of income if you were to become disabled.
Based on this information, one could conclude that applying for SSDI would be a last resort and motivated out of necessity. So when you have a client or family member who may be facing this grim reality, what do they need to know to navigate the process?
The first matter is to determine if they have enough work credits covered by Social Security to qualify. Second is to determine if they have a medical condition that will meet the definition of disability by Social Security Administration. The Social Security website www.socialsecurity.gov is a valuable source of information.
A person may be eligible for SSDI if they cannot work because of a physical or mental condition that is expected to last at least one year or will result in their death. More specifically, the person must be unable to perform substantial work. Generally, this means working and earning a certain amount of income. The Social Security Administration (SSA) has its own criteria to determine if the person is disabled. The fact that an insurance company or other governmental agency has declared a person disabled is not sufficient for SSA. Furthermore, having a statement from a medical doctor indicating the person is disabled is not in and of itself sufficient for SSA. It would be appropriate to note that the process of applying and qualifying for SSDI can take months, and it could be denied at least once before you are finally successful.
1. Applying for Disability Benefits for Myself http://www.socialsecurity.gov/info/isba/disability/firstpartydib.htm
Note, you can start an application and come back to it to finish.
2. Checklist for Online Adult Disability Application http://www.socialsecurity.gov/hlp/radr/10/ovw001-checklist.pdf
3. Disability Planner: How We (SSA) Decide if you are Disabled http://www.ssa.gov/dibplan/dqualify5.htm
4. Link to Other Disability Publications
5. How the Disability Application Process Works http://www.socialsecurity.gov/hlp/radr/10/ent001-app-process.htm
6. Frequently Asked Questions https://faq.ssa.gov/link/portal/34011/34019/ArticleFolder/305/Apply-for-Disability
Among the documents that may be needed are medical records with dates of treatment from doctors, hospitals, clinics and others. Also, lab results, a listing of all medications, and contact info for all your medical providers may be requested. In addition to the medical type records, they may request a list of all the employers you have had in the previous 15 years, including a description of the type of work you performed. Other items that are likely to be needed would be proof of citizenship (including birth certificate), marriage and divorce papers, records related to military service, and information supporting your education and training. http://www.ssa.gov/disability/professionals/bluebook/evidentiary.htm
The SSA will review the relevant documents to determine if they provide evidence of a physical or mental impairment that prevents the applicant from working, which is known as functional limitations. In this assessment, they may be rating the person’s residual functional capacity. Among the elements considered could be combinations of how much the person can lift, how long can they sit or stand, how well they can reach overhead or reach forward, they can crouch, stoop or bend, how well they can grasp objects, perform dexterous finger movements and how well they can see and hear.
SSA has a handbook known as the Disability Evaluation Under Social Security. To some, this handbook is known as “the Blue Book”. http://www.ssa.gov/disability/professionals/bluebook/AdultListings.htm
This handbook has a listing of impairments of the most common medical conditions considered to be severe to qualify the person for SSDI, because their impairment would keep them from working. If the application falls within the definitions and guidelines of this handbook, then the application may move along more quickly and easily.
SSA has two programs for people who have become disabled. The first, which we describe above, is SSDI which is designed for people who have worked and qualify in part because they have paid taxes into the Social Security system. If such a person is deemed to be disabled, they will receive SSDI benefits regardless of their assets or other sources of income. The second program is Supplemental Security Income (SSI). SSI is a needs based program and is designed to pay benefits to disabled people who need assistance with basic living costs. A person can qualify for this benefit even if they have never paid into the Social Security system. However, much like Medicaid, the person will only qualify if the family assets and income are below a certain threshold. It is strictly a need-based program. In fact, in many cases if the person qualifies for SSI, they may also qualify for Medicaid as well as other government programs, such as food stamps.
If the person is applying for SSDI, they should understand that there is a five-month waiting period. This means that SSA will not pay any benefits for the first five months after the person is determined to be disabled. At times, the question will be whether the person will be able to go back to work and then have to start all over in the process. The answer is that SSA encourages the person to attempt this transition and has an expedited reinstatement process as a safety net if the transition is not complete or successful.
As we can see from this brief article which is intended to give a broad overview of qualifying for Social Security Disability, disability is one element of financial planning that can be very intricate and an area which you would benefit from consulting with a professional who has handled previous cases. This research also gave me a renewed perspective about the need to discuss the contingencies for disability with our clients.