If you’re on SSDI and interested in investing, keep these things in mind: firstly, report all income to the Social Security Administration; secondly, when investing your funds you must report them as income to them as soon as possible; finally report any gains/losses to them promptly and accurately.
This income may include dividends, rent from property ownership or passive investments such as bonds. It won’t impact SSD benefits.
Investment Options
If you are receiving disability benefits, investing your funds may be beneficial; just make sure it does not impact your SSDI benefits in any way. Here are a few ideas:
Disability payments may be invested in a taxable brokerage account as one way of diversifying your investments, though you should bear in mind that any profits will be taxed as income.
Saving in an ABLE account, Individual Development Account (IDA), or the PASS program offers another way of saving that does not count towards compensation or affect asset limits imposed by Social Security Disability Income or waiver programs. You can use these savings accounts for assistive technology purchases, daily expenses, and long-term goals.
Roth IRAs
If you are receiving SSDI benefits, it’s essential that you understand how an IRA could impede them. The Social Security Administration will view an IRA as a financial resource and may reduce monthly benefits accordingly if too much income is generated through it.
However, this only applies if your income exceeds the current substantial gainful activity (SGA) limit. As long as your earnings remain below this limit, however, you can continue working while still investing money into a Roth IRA.
An alternative strategy might be using a taxable brokerage account instead of a Roth IRA, which will let you keep your contributions but also provide more freedom when investing earned income in various assets. Determining if this strategy suits your particular circumstances depends upon speaking to a certified financial planner first.
Taxes
While receiving SSDI benefits is not technically taxable, the IRS still taxes some disability payments such as SSDI awards. To determine this, they add half of an SSDI award to all other income (excluding interest payments exempt from taxes) for that year and compare this figure against an individual and tax filing status specific base amount.
If the total exceeds the base amount, up to 85% of SSDI may be considered taxable and individuals can ask Social Security Administration to withhold taxes from their benefits to avoid having to come up with the money at tax time.
People on SSDI may seek assistance from a tax professional when it comes to managing their taxes. A knowledgeable accountant can review a person’s finances and suggest strategies for lowering tax liabilities; oftentimes the costs associated with consulting an accountant will more than offset by savings gained by avoiding an IRS audit altogether.
Brokerage Accounts
Brokerage accounts enable individuals to invest in securities such as stocks, ETFs, mutual funds and various bonds. Some brokerage firms even offer tax-advantaged IRA accounts or health savings accounts.
Passive forms of income such as interest on bank accounts and dividends from investments don’t impact SSDI eligibility; however, benefits could be reduced if an SSDI beneficiary’s earnings from self-employment exceed the program’s limit on substantial gainful activity.
SSI benefits have strict rules regarding money in bank accounts and assets that can be owned, so beneficiaries must be mindful of these regulations to avoid losing disability benefits. An experienced disability attorney can help make sure any income received passive and doesn’t breach SSA regulations; additionally, they can assist beneficiaries in obtaining affidavits to establish that investments don’t interfere with SSDI eligibility – this can help preserve benefits while embarking on new careers or expanding wealth.
