SSA does not consider investment income the same way as earned income; however, when investing in rental properties you must exercise caution.
SSI has established stringent rules to restrict people from possessing assets exceeding a specified limit, such as stocks, bonds, checking or savings accounts or any other item with saleable value.
Individual Development Accounts (IDAs)
IDAs (individual Development Accounts) are savings accounts designed to assist low-income people save for specific goals, including home ownership. Most are administered by local non-profit community organizations and may offer matching contributions. Donors often qualify for tax deductions for their contributions.
IDAs do not count towards your SSI asset limit because they are part of the Plan to Achieve Self-Support (PASS) program offered by Social Security Administration, which allows individuals to spend money towards work goals without impacting cash benefits.
IDAs are funded by both federal and private donors and offer matching funds on various savings goals. Typically lasting five years, participants must commit to saving towards the goal they select while also participating in financial education training and assets-building courses.
Investing in stocks gives you a stake in the profits (and losses) of companies, offering potentially higher returns than investments such as real estate or CDs. While it is impossible to predict exactly when investments will bring returns, investing in stocks has historically provided more returns than many alternatives such as real estate or CDs.
Profits from stocks will not impact SSDI benefits; however, income limits apply for earnings from work and you must pass both a recent and duration work test in order to qualify.
SSDI differs from Supplemental Security Income Disability in that there are no rules about your assets and income that limit how much SSI you can receive each month; any earnings can reduce that check whereas with SSDI there are none such restrictions or regulations limiting payments to you.
Real estate refers to land and structures affixed to it, such as houses, office buildings, apartments, strip centers and warehouses. Personal property like furniture or appliances does not fall into this category unless used for income-generating purposes.
Passive income generated from rental properties does not impede SSDI eligibility; however, passive investment income such as royalties or dividends may disqualify you for benefits under SSI.
SSA considers assets to be resources, with an individual not exceeding $2,000 in countable resources or $3,300 combined as a couple in order to receive Supplemental Security Income benefits. Up to $100,000 may be put into an ABLE Account which is exempted from resource limits – although only applicable if you become disabled before turning 26 years old.
Taxable Brokerage Accounts
Brokerage accounts are investment accounts that allow you to buy and sell stocks, mutual funds, and other investments. Also referred to as taxable brokerage accounts due to higher taxation on income generated in such accounts as opposed to retirement accounts like IRAs.
Taxable brokerage accounts often give investors greater control of their investments, helping to meet specific goals more easily. Unfortunately, however, taxes imposed on such accounts can significantly decrease your after-tax investment returns.
SSDI puts limits on how much income can come from work while still receiving benefits, but investments don’t. Therefore, taxable brokerage accounts may provide an effective means of saving for disability expenses.
Social Security disability benefits do not qualify as earned income; however, other sources such as salary, hourly wages, tips, bonuses or self-employment earnings all count as earnings and can be put towards investing in a Roth individual retirement account (IRA).
But keep in mind that early withdrawal will incur income taxes and an early withdrawal penalty of 10%, though you might be exempted if withdrawing for certain qualified purposes, such as buying or building your first home, paying unreimbursed medical expenses surpassing 7.5% of adjusted gross income, etc. It would be wise to consult a tax and financial expert for guidance when withdrawing early contributions before age 59 1/2.