Can You Have Investments While On SSDI?
Wednesday, October 4th 2023
Social Security Disability Insurance (SSDI) is a federal program in the US designed to assist those unable to work due to qualifying disability with financial support. SSDI recipients frequently inquire as to their ability or eligibility in making investments while collecting benefits; or maintaining existing ones while investing.
This comprehensive article examines the relationship between SSDI and investments, looking specifically at types of permitted investments that could impact benefits as well as strategies that ensure financial security without jeopardizing eligibility. Furthermore, we’ll highlight why staying up to date with any latest rules or regulations could prevent potential issues arising later.
Before diving deeper into investing while on SSDI, it is crucial to comprehend its fundamentals. SSDI is administered by the Social Security Administration and designed to provide financial support for people unable to work due to disability; to qualify individuals must accumulate sufficient work credits and meet its definition of disability. SSDI differs significantly from Supplemental Security Income (SSI), a needs-based program intended for people who possess limited income or resources.
Can You Have Investments While on SSDI?
Yes, investing is allowed while receiving SSDI benefits; however, it’s essential that you understand all types of investments available and their effect on eligibility and benefits.
Certain investments do not affect SSDI eligibility. Examples are:
- Your primary residence
- One vehicle, if used for transportation
- Personal property and household items
- Life insurance policies with a combined face value of up to $1,500
- Burial plots or spaces for you and your immediate family
- Burial funds up to $1,500 each for you and your spouse, if designated and set aside
These investments typically do not affect SSDI benefits if they remain within certain parameters.
Resources that could impact your SSDI eligibility include investments that count as income; such investments might include:
- Bank accounts (checking, savings, and certificates of deposit)
- Stocks and bonds (1)
- Mutual funds (2)
- Real estate other than your primary residence
- Additional vehicles
Notably, SSDI benefits do not rely on financial need as their eligibility criterion; so, having investments will still enable you to receive payments provided that they meet disability criteria and have earned enough work credits. As regulations change over time, however, staying informed could have significant ramifications on eligibility status and should never be overlooked as part of an application process.
How Investments Can Affect Your SSDI Benefits
Though investing is legal, certain investments could potentially have an adverse impact on SSDI benefits:
- Passive Vs Active Income: Passive income such as dividends and interest from investments generally does not impact SSDI benefits as long as it falls below the Substantial Gainful Activity (SGA) limits set forth by the Social Security Administration. For 2021, SGA limits were $1,310 monthly for non-blind individuals and $2.190 each month for blind individuals – it is important to keep up to date as these may change throughout each year.
- Active income refers to work or business activities in which you actively engage, such as work-from-home opportunities. Exceeding your SGA limit with this income could jeopardize SSDI benefits as it could indicate you can engage in substantial gainful activity and may cause your SSDI benefits to decrease accordingly.
- Capital Gains: Capital gains refer to profits earned from selling investments such as stocks, bonds, or real estate and sold for profit. Capital gains generally fall into unearned income categories and should not impact SSDI benefits; however, they could count toward your SGA limit, potentially impacting benefits further down the line.
- Tax Implications: SSDI recipients who invest can have tax ramifications associated with their investments. High investment income could cause part of your SSDI benefits to become taxable; the Internal Revenue Service uses a formula to assess whether SSDI benefits should be taxed based on total income – this includes passive and active investment income – so consulting a professional tax adviser is vitally important in understanding any implications on how investments could potentially alter SSDI benefits.
Strategies to Manage Investments While on SSDI
- Diversify your investments: Diversifying your investments is one way to protect the eligibility and stability of SSDI benefits without risking overshooting SGA limits and losing eligibility. By diversifying between countable and uncountable assets, diversifying investments reduces your risks of exceeding SGA limits while safeguarding eligibility.
- Monitoring your investment income: Monitoring investment income closely can be essential in staying under the SGA limit and reaching retirement successfully. Regularly review your portfolio with your advisor, adjusting as required if income approaches this threshold.
- Plan for tax implications: Understanding the tax repercussions of investments is vital in protecting SSDI benefits. Consult a tax professional in planning for potential taxes imposed upon investment income or SSDI benefits as part of their strategy if applicable and make any adjustments as required to optimize it for best performance.
- Stay informed: Be aware of any modifications to SSDI rules and investments is essential to preserve benefits. Changes in SGA limits, countable resources or eligibility may have an effect on eligibility. Stay informed and modify your investment strategy when necessary.
While investments can be undertaken while receiving SSDI benefits, it’s vital that you understand which ones are allowed and their impact. By diversifying your portfolio and keeping an eye on income levels as well as planning ahead for tax implications and staying informed, you can manage them successfully without jeopardizing SSDI eligibility. Seek advice from both a financial adviser and tax professional when making important financial decisions to safeguard the future.
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