While there are people with disabilities who make a fairly comfortable income, disability can be a major impediment to earning power. If you are the parent of a child with special needs, you regularly think about whether and how your child can live a dignified life when you’re no longer here.
Even able-bodied workers face significant risk. Studies have shown that the average 20-year-old American worker has a 25% chance of experiencing a disability before retirement age. Many people with disabilities need reliable income to cover both ordinary and unique expenses.
Without such income, the result is poverty and magnified life limitations from the impairment itself. SSI and SSDI benefits are designed to prevent this.
Supplementary Security Income (SSI)
The SSI program pays a monthly stipend to people with few assets and low incomes. Recipients must be at least 65 years of age, blind, or disabled. Blind or disabled children whose parents have limited income and few resources may also qualify.
Applicants must be American citizens living in the U.S., though certain noncitizen residents may qualify. The program is managed by the Social Security Administration (SSA), but SSI is funded by general taxes, not Social Security taxes (unlike SSDI, covered below).
As a federal program, the basic amount paid is the same nationwide and is known as the federal benefit rate (FBR). However, states can add to this minimum, and many do. The FBR increases annually to adjust for cost-of-living changes. For couples, the monthly SSI payout is 1.5 times that of an individual beneficiary.
Income Calculation
The Social Security Administration considers wages, pensions, Social Security benefits, shelter, and food when calculating income for eligibility. It also includes part of a spouse’s income for married applicants and part of parents’ income for applicants under 18.
For applicants who are blind or disabled, wages used for work-related goods and services (such as a wheelchair) are excluded. Income cutoffs vary by state. Certain incomes are also excluded, including SNAP, home energy assistance (with exceptions), and shelter from private not-for-profit organizations.
Asset Calculation
Assets counted toward SSI eligibility include bonds, stocks, cash, bank accounts, and real estate. The maximum asset total is $2,000 for individuals and $3,000 for couples. These strict asset limits are one reason why families turn to special needs trusts to hold resources without jeopardizing benefits. For younger beneficiaries, ABLE accounts offer another approach to save up to $17,000 annually while protecting SSI eligibility.
Exceptions exist. For example, you can qualify for SSI while selling property valued at no more than $3,000. The home you live in and your car (with exceptions) are excluded from the resource count.
Social Security Disability Insurance (SSDI)
SSDI provides a monthly payment to people unable to work due to a medical condition expected to last one year or more, or lead to death. Family members of the disabled person may also qualify in certain cases. In some situations, childhood disabled beneficiary (CDB) benefits may extend SSDI eligibility into adulthood.
Like SSI, SSDI is managed by the Social Security Administration but is funded by Social Security taxes. About 11 million Americans (9 million workers and 2 million dependent spouses and children) receive SSDI benefits. Your benefit amount depends on past earnings and is subject to a ceiling.
Work Tests
Applicants must meet two requirements: a recent-work test and a duration-of-work test.
The recent-work test measures how many years you worked immediately before your disability. Requirements vary by age. Workers 24 and younger need 1.5 years of work in the preceding three-year period. Those 24-30 need three years in the preceding six years. Applicants 31 and older must have worked at least five years in the preceding 10 years.
The duration-of-work test also depends on age, with 14 age brackets, each with its own requirement. If you are disabled but still working and earning above a certain monthly minimum, you will not qualify for SSDI.
Application
If you have a disability you believe qualifies for SSDI, submit an application as soon as possible. Processing and approval can take months or, if initially denied, even years.
The longer you wait, the more financial pressure you’ll face since your disability limits earning capacity. File the application even if you don’t have all required information; submit details as you gather them.
If denied, you have the right to appeal. Recent research shows that nearly 60 percent of applicants denied at the first stage file an appeal, with about half eventually accepted into the SSDI program.
Get Started
Both SSI and SSDI are extensive programs with many provisions and exceptions. This article provides only a broad overview. As you plan for the long term, consider how ABLE accounts can complement your SSI strategy, especially with recent eligibility expansions.
If you have questions about SSI, SSDI, or special needs planning, explore our comprehensive special needs planning guide or start a conversation with us.
