Can You Have Investments While on SSDI?
Disability can make obtaining financial advice more challenging; many resources cater towards those with disposable income rather than those on SSDI benefits.
There are various investments you can use to grow your wealth without jeopardizing public benefits eligibility, including: ABLE accounts – These tax-advantaged savings and investment accounts were established in 2014 to enable individuals with up to $100,000 of assets outside the limits set for public benefit eligibility to invest.
Individual Retirement Accounts (IRAs)
Individual retirement accounts, such as IRAs, Keoghs, 401(k)s and Federal Thrift Savings Plans may be held while receiving SSDI benefits; however, current SSI regulations regard withdrawals from such accounts as income. If the program treated these funds differently it would encourage individuals to save in anticipation of applying for future SSDI benefits, ultimately leading to reduced program costs and cost-cutting measures.
IRAs, unlike savings accounts, are designed specifically for holding long-term investments like stocks, bonds, mutual funds and exchange-traded funds (ETFs). You can open this type of account through brokerage firms who offer an array of investments options. Withdrawals from an IRA are taxed as ordinary income though there may be penalties applied if funds are withdrawn prior to age 59 1/2; similar penalties exist for withdrawals made before this age such as certificates of deposit. Roth or SEP IRA accounts also exist but may not be suitable – these accounts typically have higher income limits that may make investing worthwhile for individuals expecting SSI benefits.
Brokerage Accounts
Brokerage accounts are general investment accounts held with brokerage firms that enable individuals to purchase and sell financial securities such as stocks, bonds, mutual funds, and exchange-traded funds. Social Security disability applicants, recipients and representative payees are allowed to utilize such accounts provided that assets do not reflect too much income for eligibility considerations.
These accounts are generally subject to taxation; any profits realized upon selling investments will likely incur ordinary income taxes; however, investments held for more than one year typically attract lower capital-gains tax rates.
Individuals on SSDI benefits may also hold Certificates of Deposit (CDs), which are savings-like accounts with fixed interest rates and future maturity dates, that don’t count as unearned income for SSDI benefits. CDs don’t count against your SSA income limit so they could help prevent exceeding them, though their earnings potential varies year to year.
Savings Accounts
Prior to 2014, people with disabilities did not have many savings options available to them. With the Achieve a Better Life Experience Act of 2014 (known as the ABLE act), disabled individuals now have access to savings options that won’t compromise their eligibility for SSDI or Supplemental Security Income (SSI).
Accounts allow individuals to invest in items like education, assistive technology, housing and transportation – or they can invest their earnings – but please be aware that any funds used for non-QDE purposes may be subject to Social Security resource-counting rules.
Not only can ABLE accounts help people with disabilities save for the future, but special trusts may be established to assist. These don’t factor into someone’s assets or income calculations but may have fees attached. Beneficiaries should consult a financial advisor prior to investing in these types of trusts; additionally they might consider the ABLE Act’s annual contribution limit – currently set at $2,000 for single individuals and up to $3000 for couples (SSI or SSDI have higher limits respectively).
Real Estate
As a disability lawyer, I regularly encounter clients with questions regarding real estate investments and their eligibility for Social Security Disability Income benefits (SSDI). Passive income such as rental property should generally not disqualify individuals from receiving benefits; however it’s essential that one understands that distinguishing earned versus unearned income is crucial in qualifying.
To avoid losing benefits due to misclassified income sources such as ETFs or REITs, Social Security Administration considers dividends and interest from investment assets like ETFs or REITs earned income; rent from properties is considered unearned income. To protect yourself against losing them altogether it’s crucial that property managers or maintenance workers can demonstrate that you were not directly involved with activities related to renting it out in any material way.
What effect assets and income will have on SSDI claims depends on which disability program you apply under. Jeffrey Freedman Attorneys can help identify this program and prepare your application materials – get in touch today for a complimentary case evaluation!
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