Can You Have Investments While on SSDI?
Typically, Social Security Disability payments may be invested provided your income falls below the Supplemental Security Income (SSI) income limits; however, certain assets and savings accounts may be prohibited depending on what SSI allows.
To gain more knowledge on how to invest your SSDI while still protecting its benefits, speak with a financial advisor. SmartAsset provides free tools that connect users with qualified advisors in their area.
Roth IRAs allow you to invest your earned income tax-free, which may be advantageous for people on SSDI. Unlike employer-sponsored 401(k) plans, which limit investment choices available, a Roth IRA allows for you to choose your own investments and is therefore more suitable.
While receiving SSDI benefits, you are eligible to open and contribute to a Roth IRA provided that other earned income is available. When withdrawing investments after age 59.5 and using qualified withdrawals, no tax is due.
One exception may apply if you invest an IRA while on SSDI: the Social Security Administration could consider withdrawals as financial resources and reduce or suspend benefits accordingly. As Social Security disability benefits focus on your physical condition, the SSA might see investment earnings as evidence that you can still work. Whether or not they do depends on their definition of substantial gainful activity (SGA). Currently the limit is $1350 monthly.
Individual Development Accounts (IDAs)
Individual Development Accounts (IDAs) are savings programs designed to help those on Social Security Disability Insurance save for specific goals such as buying a home, starting a business or furthering education. Many IDA programs also provide financial education and coaching. Each dollar saved will earn matches ranging from 1:1 up to 5:1, so every time someone saves $1 their account adds $5 as part of its contribution – another incentive!
An Individual Development Account, or IDA, is intended to aid those struggling to save. States and community organizations sponsor these accounts that work in tandem with banks in offering these accounts.
The federal Assets for Independence Act allows an individual to save up to $100,000 in an Individual Development Account without it counting towards their Social Security eligibility. There are over 600 IDAs across the country and an online tool from the Administration for Children and Families can help locate one near you.
Tax-Free Brokerage Accounts
No matter which account type you use to invest, it’s essential that you understand its tax implications. Investment income may be subject to capital gains taxes every time an asset is sold; dividends and interest income could be taxed as well – however tax loss harvesting strategies could help offset some of your losses.
Disability advocates worked hard to pass the ABLE Act, which allows individuals with disabilities to save and invest without jeopardizing government benefits. Anyone meeting age of onset requirements for qualifying disabilities can open an ABLE account online; friends and family can contribute money; if their combined ABLE account balance exceeds $100,000 their Supplemental Security Income benefit may be temporarily suspended until that excess amount has been removed from their accounts; similar rules apply for other federal means-tested benefits. If you’re interested in opening one yourself speak with your financial professional or reach out your state ABLE program
Real estate refers to any land and any structures attached to it, such as houses, apartments, office buildings or strip centers. While owning rental properties doesn’t compromise SSDI eligibility, they should be seen more as investments than sources of personal income.
Lenders take into account all sources of income when assessing mortgage loan eligibility, including alimony payments, child support payments and disability income. But these income sources must demonstrate they will continue for an extended period to get approved.
SSDI limits how much unearned income you can receive and still qualify for benefits, with cash gifts and inheritances counted as unearned income; rent from real property doesn’t count, making it an effective way of saving for a down payment while meeting the SSI requirements. If you earn too much rent each month, however, Social Security Administration could require that you perform substantial gainful activity (SGA), potentially resulting in the suspension or even discontinuance of benefits.
Categorised in: Blog