What is Social Security Disability Insurance?
If you’re receiving Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI), it’s natural to wonder if your benefits will be affected when you start generating income from a passive and/or semi-passive source. Allow our staff here at Winkler Kurtz to provide you with some clarity.
Will the government take back money that was already yours? Will additional funds make you ineligible for certain types of benefits?
The Social Security Administration (SSA) has a detailed explanation on their website, but let’s break it down piece by piece.
Only your income from work, self-employment and other sources will affect your eligibility for SSDI or SSI. Passive forms of income such as interest from bank accounts or dividends from investments do not affect your benefits.
If you earn over a certain amount from self-employment, the first $65 plus one dollar for every two dollars of earnings above that level may be deducted from your benefits. However, this won’t happen automatically. You must inform the SSA of any earnings above those limits by completing a SSA-7161 form and returning it to your local SSA office.
If you do not report this type of income, the SSA may assume that your reported earnings are incorrect and reduce or terminate your benefits as a result. You could even face criminal prosecution for fraud if the agency is not informed of the additional earnings – so don’t forget!
Bottom line: passive income earned through bank accounts, mutual funds and other investments has no effect on your Social Security benefits. And even if you exceed the limits for self-employment earnings, it’s still your responsibility to report this to the SSA so they can deduct the appropriate amounts from your monthly check.
One thing to keep in mind… the money you earn from a job or your small business will show up as income on your earnings record. That’s how the SSA determines whether you’re still eligible for benefits, and it could trigger an audit of your disability status if income is too high. This is covered in more detail below.
What About Monthly Earnings?
If your income is low enough to qualify for SSDI or SSI, the SSA doesn’t require you to report how much money is in your bank accounts or what investments you have. If you are earning income from a job or self-employment, however, the agency will want to know exactly how much you’re bringing in.
The SSA uses a formula to calculate your monthly earnings called an Average Indexed Monthly Earning (AIME). It starts with the first $885 you earn each month and then adjusts that amount based on how much income is necessary to equal the average wage for workers who have been working at least two-thirds of their adult life.
Adding up your monthly income from work and self-employment will determine whether you’re eligible for SSDI or SSI, as well as the amount of your benefits and how much could be deducted if you earn too much. If your earnings fall within a certain range, the SSA may ask you to submit additional medical evidence to support your claim.
If you want to be sure that your income is not disqualifying, it’s important to make an appointment with the SSA to discuss any earnings you receive from work or self-employment. Your local advocate can help you schedule these appointments and check on the status of your application.
Bottom line: Social Security benefits will NOT be affected by passive income such as interest, dividends or capital gains. However, the SSA will want to know how much you’re earning from work and self-employment – especially if it’s more than the monthly limit.
Contact Winkler Kurtz, LLP
If you have questions regarding social security, please don’t hesitate to contact a representative from our office and schedule your free consultation today.