Cost-of-living adjustment helps Social Security beneficiaries; Allsup outlines other benefits of SSDI
Belleville, Ill. - Jan. 23, 2009 - With the arrival of 2009, Social Security disability recipients are seeing their monthly benefits increase with the annual cost-of-living adjustment (COLA), according to Allsup, which represents tens of thousands of people in the Social Security Disability Insurance (SSDI) process each year.
"The largest COLA increase in more than 25 years is good news for Social Security recipients," said Jim Allsup, CEO and founder of the company, which also provides financial and healthcare-related services to people with disabilities. "It reflects a higher cost of living that hit hard for many people and their families in 2008."
But it's possible that beneficiaries will not see an increase in 2010, based on a recent report by the Congressional Budget Office¹, which projects a COLA of zero percent if consumer prices decline in 2009. The CBO economic forecast includes expectations for lower inflation this year.
Social Security beneficiaries are receiving their first checks this month with the 5.8 percent COLA increase², as announced by the Social Security Administration. The increase took effect Dec. 31, 2008. The annual adjustment is based on the Bureau of Labor Statistics' Consumer Price Index for Urban Wage Earners and Clerical Workers.
The estimated average benefit for all disabled workers is $1,064 in 2009, which compares with the average benefit of $1,004 in 2008. With the COLA increase, the estimated average benefit for a disabled worker, with spouse and one or more children is $1,793.³
"The increase for 2009 reflects the value of seeking SSDI for people who cannot work any longer because of a long-term disability," Mr. Allsup added. "But there are additional reasons to consider applying for disability benefits."
SSDI is a federally mandated insurance program overseen by the Social Security Administration (SSA) that provides monthly benefits to individuals who are under full retirement age (age 65 or older) and who can no longer work because of a disability (injury, illness or condition) that is expected to last for 12 months or is terminal. Individuals must have paid FICA taxes to be eligible. More details are provided in the "SSDI Overview" on Allsup.com.
Why People Apply For SSDI
Individuals who have worked for many years and must quit because of an injury, chronic condition or disease should consider the following financial planning aspects of applying for SSDI:
1. Increased monthly income. Social Security provides a regular monthly payment that includes an annual cost-of-living increase. All or a portion of SSDI benefits may be tax-free at the federal level and many states do not tax Social Security disability benefits.
2. COBRA extension. For some workers, once you leave your job, you, your spouse and dependents may continue to get health insurance at group rates for up to 18 months through your employer under COBRA. There is the opportunity to get an 11-month extension by qualifying for SSDI, allowing for up to 29 months of healthcare coverage.
3. Medical benefits and prescription drug coverage. No matter someone's age, anyone who has been receiving SSDI benefits for 24 months becomes eligible Medicare, including Part A (hospital benefits) and Part B (medical benefits). As a Medicare beneficiary, you also are eligible for Medicare Part D, which is the prescription drug plan.
4. Protected retirement benefits. Since your earnings records factor into your Social Security retirement, it's important to take advantage of a feature of receiving Social Security disability benefits: the "freeze" on your earnings record. This means that the years that you were not working (with earnings of $0) because of a long-term disability would not be factored into your Social Security retirement benefit upon reaching full retirement age.
5. Dependent benefits. If you receive Social Security disability benefits and you have a dependent under age 18, he or she also may be eligible for benefits.
6. Return-to-work incentives. Under the SSA's work incentives program, individuals on SSDI can test their ability to return to work. They continue to receive benefits regardless of how much they earn during the trial-work period, which continues until they have worked nine months within a 60-month period. In the 36 months after the trial period, they can wo
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