How Are Social Security Disability Settlements Calculated?

A Complete Guide to SSDI, SSI, Back Pay, and Concurrent Benefits

When a serious injury, illness, or chronic medical condition makes it impossible to work, your entire life can change overnight. Paychecks stop, but bills don’t.

That’s exactly why Social Security Disability benefits exist.

These programs aren’t handouts. They’re protections you paid for through years, sometimes decades, of hard work and payroll taxes. If your health takes away your ability to earn a living, the system is supposed to step in and provide financial stability.

But for many people, one question looms large: How much will I actually receive?

Unfortunately, there’s no simple flat number.

Social Security Disability benefits are calculated using formulas, earnings records, income limits, offsets, and sometimes even multiple programs at once. The process can feel confusing, and small mistakes can cost you thousands of dollars in benefits you’re legally entitled to.

At Morgan & Morgan, we’ve helped thousands of people secure and maximize their disability benefits. Below, we break down exactly how settlements and monthly payments are calculated so you know what to expect and how to protect your rights.

First, You Should Understand the Two Different Disability Programs

Many people assume there’s just one “disability check.” In reality, there are two completely different federal programs, and they calculate benefits in very different ways:

• Social Security Disability Insurance (SSDI): SSDI is available to individuals who have worked and paid Social Security taxes. The benefits are based on your lifetime earnings before your disability.
• Supplemental Security Income (SSI): SSI provides financial assistance to individuals with limited income and resources, regardless of work history. This program is need-based and is funded by general tax revenues.

Some people qualify for one. Some qualify for the other. And many qualify for both at the same time. Understanding the difference is the first step toward understanding your settlement.

How SSDI Benefits Are Calculated (Work-Based Benefits)

SSDI is essentially insurance. If you worked and paid Social Security taxes long enough, you earned coverage. Think of it like a safety net you’ve been funding your entire career.

Unlike SSI, SSDI is not based on your financial status. Instead, it’s based on:

• How long you worked
• How much you earned
• How much you paid into Social Security

The more you have earned over your lifetime, the higher your potential benefit.

The Math Behind SSDI

Social Security uses two key calculations:

Step 1: Average Indexed Monthly Earnings (AIME)

The government reviews your lifetime earnings and adjusts older wages for inflation, while selecting your highest earning years and calculating your average monthly earnings.

This total number is called your AIME. It represents what you typically earned per month during your working years.

Step 2: Primary Insurance Amount (PIA)

Next, Social Security applies a formula that replaces part of your income. The formula is progressive, meaning:

• Lower earners receive a higher percentage of replacement
• Higher earners receive a smaller percentage

The result is your PIA, which becomes your monthly SSDI benefit.

For instance, if your work history averages out to $4,000 per month, your benefit will be a percentage of that, not the full amount. Most SSDI payments fall somewhere between $1,200 and $2,800 per month, depending on earnings history.

Additionally, some families receive more than just one check. You may also qualify for:

• Dependent child benefits
• Spousal benefits
• Annual cost-of-living increases (COLA)

These additions can significantly increase your total monthly income.

How SSI Benefits Are Calculated (Needs-Based Benefits)

SSI works completely differently. It is not tied to your work history at all. Instead, it’s based on financial need.

SSI helps people who have disabilities, little or no income, limited assets, and may not have enough work credits for SSDI.

Here’s how SSI payments are determined. SSI starts with a federal maximum payment amount. Then Social Security subtracts:

• Countable income
• Other benefits
• Available resources

The lower your income and assets, the higher your SSI payment.

Because of this system, SSI checks are usually smaller than SSDI checks, but for many people, they’re critical for survival.

Can You Get SSDI and SSI Together? What Are Concurrent Benefits?

This is one of the most overlooked parts of disability benefits, and one of the biggest opportunities for applicants.

Many people qualify for both SSDI and SSI at the same time. This is called concurrent benefits. It happens when:

• You qualify medically for SSDI
• But your SSDI payment is low
• And you meet SSI’s income and asset limits
   

In these cases, SSI can “top off” your SSDI check.

For example, let’s say your SSDI benefit is $750 a month, and your SSI federal limit is around $940 a month. SSI may provide an additional $190 a month to bring you closer to that limit. That extra money can mean groceries, prescriptions, rent, and utilities can be more easily covered.

For someone unable to work, it can be the difference between stability and crisis, yet many applicants are never told they qualify for both. That’s one reason experienced legal guidance can matter so much.

What Counts as Your Disability “Settlement”?

When people talk about a disability “settlement,” they’re usually referring to the total compensation owed after approval, not just the monthly payment.

This total often includes three parts:

• Ongoing Monthly Benefits: Your regular SSDI or SSI check.
• Back Pay: Benefits owed between your application date and your approval date.
• Retroactive Pay: For SSDI, you may receive benefits for up to 12 months before your application if you were already disabled.

Combined, this can add up fast.

How Back Pay Is Calculated

Let’s look at a simple scenario. If your benefit is $1,600 a month and if your case took 14 months to approve, then you may receive $1,600 × 14 = $22,400 in back pay.

That’s your money you should have been receiving the entire time.

SSI back pay may be split into installments, while SSDI back pay is often paid in a lump sum.

What Can Reduce Your Benefits?

Unfortunately, some factors can lower payments if not handled correctly.

Workers’ Compensation Offsets

If you receive workers’ comp, SSDI may be reduced to prevent “double recovery.”

Other Public Disability Benefits

Certain state programs may affect payments.

SSI Income Rules

Even small changes in income or assets can reduce SSI.

Administrative Errors

Incorrect earnings records or disability onset dates can drastically lower what you receive.

We regularly see people underpaid simply because Social Security made a calculation mistake.

And those mistakes often go unnoticed unless challenged.

Why Many Disability Claims Are Underpaid

Here’s something most people don’t realize: Even approved claims are sometimes wrong. We’ve seen cases where:

• Earnings weren’t recorded properly
• Onset dates were set too late
• Concurrent benefits weren’t applied
• Dependents weren’t included
• Back pay was miscalculated

Each issue can cost thousands of dollars. The system isn’t designed to maximize your benefits. It’s designed to process claims. With the right legal advocate in your corner, however, you can avoid these common pitfalls.

Protecting Your Right to Every Dollar You Earned

Disability benefits exist because working Americans fund them. If you paid into Social Security for years and now can’t work, you deserve the full protection you earned and no less. That means not “whatever the system happens to calculate” but the full amount.

That’s why many people choose legal help. Not because they want to fight, but because they want fairness.

At Morgan & Morgan, we help clients determine whether they qualify for SSDI, SSI, or both. Our legal team can identify concurrent benefit opportunities, correct earnings records, and maximize back pay.

We also appeal denials, challenge underpayments, and fight to ensure every dependent benefit is included.

And it costs you nothing out of pocket to work with us, because we don’t get paid unless you win. That’s right—our Fee Is Free®, because disability benefits shouldn’t feel like another battle when you’re already dealing with your health.

How Can a Social Security Disability Benefits Attorney at Morgan & Morgan Help?

Social Security Disability settlements are complex, and when you’re sick or injured, complexity is the last thing you need.

But one thing is simple. If you qualify, you have the right to every dollar available. If you’re unsure whether your benefits were calculated correctly or if your claim was denied, Morgan & Morgan is here to help.

While it is not legally required to work with a legal representative, an attorney from Morgan & Morgan can greatly improve your chances of approval and help you maximize your benefits by ensuring your application is complete and error-free.

Contact us today for a free, no-obligation case evaluation to learn more about your options and how we may be able to help.