Social Security Investment Strategies: Maximizing Your Savings

Social security recipients can invest their savings in a variety of ways. While there are certain financial factors that can disqualify someone from social security eligibility, having a savings account is not one of them. There are, however, some subtleties to be aware of. For example, there is a difference between SSDI (Social Security Disability Insurance) and SSI (Supplemental Security Income) in terms of eligibility and asset limits. SSDI beneficiaries can have unlimited savings, while SSI recipients are limited to $2,000 for individuals and $3,000 for couples in countable resources. Additionally, social security benefits grow according to the beneficiary's years of work, income, and age, so delaying claiming benefits can result in higher monthly payments.

The difference between SSDI and SSI

The Social Security Administration (SSA) administers two federally-funded disability income benefit programs: Supplemental Security Income (SSI) and Social Security Disability Insurance (SSDI). Both programs use the same medical criteria for determining disability based on medical evidence and functional abilities, and they share an application process and a disability determination. However, there are some important differences between the two.

SSDI is tied to your work history. It pays benefits to you and certain members of your family if you have a disability, have worked enough years to qualify, and have paid Social Security taxes during the years you worked. The benefits you receive are based on your earnings record, and your dependents may also be eligible for benefits from your record. Medicare entitlement begins after you have received SSDI for 24 months.

SSI, on the other hand, does not require you to have a work history. It provides money to cover basics like food, clothing, and housing if you are 65 or older or have a disability, and have limited income and resources. To be eligible for SSI, you must live in one of the 50 states, the District of Columbia, or the Northern Mariana Islands and be a US citizen or national. SSI is funded by the federal government from general tax revenues, and some states pay a supplemental benefit in addition to federal payments. The monthly benefit amount is set each year by Congress, and eligibility begins five months after the date of onset of disability.

Eligibility for SSDI

To be eligible for Social Security Disability Insurance (SSDI), there are a number of requirements that must be met. Firstly, individuals must have worked in jobs covered by Social Security and have a qualifying disability that meets Social Security's strict definition. This means that the individual must be unable to engage in any substantial gainful activity (SGA) due to their medical condition and must be unable to do their previous work or adjust to other work. The condition must also be severe enough to significantly limit basic work-related activities for at least 12 months and must be found on the list of disabling conditions maintained by Social Security. Alternatively, if the condition is not on the list, it must be determined to be as severe as a listed medical condition.

In addition to the medical criteria, there is also a work history requirement for SSDI eligibility. Individuals must have worked long enough and recently enough under Social Security to qualify. Social Security work credits are based on total yearly wages or self-employment income, with up to 4 credits earned per year. The number of work credits needed depends on the individual's age when their disability begins. Generally, 40 credits are required, 20 of which were earned in the last 10 years, but younger workers may qualify with fewer credits.

It is important to note that SSDI benefits are typically provided to those who are unable to work for a year or more due to their disability. There is usually a 5-month waiting period before the first benefit is paid in the 6th full month after the disability is determined. SSDI benefits can also be paid retroactively for up to 12 months before the application was filed if the individual had a disability during that time and met all other requirements.

SSI savings limits

The federal Supplemental Security Income (SSI) program provides monthly cash assistance to disabled or older people with little income and few assets. The SSI program is needs-based, and to be eligible, your countable resources must not exceed $2,000 for an individual or $3,000 for a couple. This is called the resource limit.

Countable resources refer to the things you own that count towards the resource limit. These include stocks, mutual funds, and U.S. savings bonds, as well as anything else you own that could be converted to cash and used for food or shelter. However, many things you own do not count towards the resource limit.

The following items are generally exempt from the resource limit:

• The home you live in and the land it is on
• One vehicle, regardless of value, if you or a household member use it for transportation
• Household goods and personal effects, such as wedding and engagement rings
• Life insurance policies with a combined face value of $1,500 or less
• Burial spaces for you or your immediate family
• Burial funds for you and your spouse, each valued at $1,500 or less
• Property you or your spouse use for a trade, business, or job
• If you are disabled or blind, money or property set aside under a Plan to Achieve Self-Support (PASS)
• Up to $100,000 of funds in an Achieving a Better Life Experience (ABLE) account established through a State ABLE program

There are also other situations where you may own things that put you over the resource limit but still qualify for monthly benefits. Additionally, if you decide to sell excess resources, you may receive SSI beginning the month after you sell them. In certain cases, you may even be able to receive benefits while trying to sell these excess resources.

SSA exceptions and programs

The SSA offers Supplemental Security Income (SSI) to eligible individuals. SSI is a federal government program that provides monthly payments to people with disabilities, blindness, or older people (65+), who have limited income and financial resources. The income limit exceptions include:

• State SSI supplement payments
• Supplemental Nutrition Assistance Program (SNAP) benefits (food stamps)
• Section 8 housing vouchers
• Rent rebates or property tax refunds
• Temporary Assistance for Needy Families (TANF)
• Certain expenses for people with blindness or disabilities

The resource limit exceptions include:

• Your home and the land it sits on, provided you live there
• One vehicle per household
• Most personal belongings and household goods
• Property you can't use or sell

The SSA also provides benefits to family members of a deceased or retired person who worked and paid Social Security taxes. These include:

• A higher survivor benefit for a spouse or ex-spouse based on the deceased's work
• Cash benefits for those 65 or older, who have worked for at least 10 years and paid Social Security taxes
• A higher parent's benefit if an adult child who was providing support passes away
• Spouse's benefits if you care for a child under 16 or disabled before turning 22
• Benefits for a child under 18 or disabled, based on the parent's work
• Child benefits for those under 18 or disabled before 22 with a deceased or Social Security-receiving parent

Additionally, those with past military service may be eligible for benefits through the Veterans Administration.

Investing in stocks, bonds, ETFs and REITs

If you're a social security recipient looking to invest your savings in stocks, bonds, ETFs, or REITs, there are a few things you should keep in mind. Firstly, it's important to understand the risks and potential benefits associated with each investment option. While investing in stocks may offer higher returns, it also comes with greater risk compared to other investment options. On the other hand, investing in bonds may provide more stable and consistent returns but with lower yields.

When considering investing in stocks, it's crucial to diversify your portfolio to minimise risk. This means investing in a variety of companies across different industries. Additionally, it's important to remember that stock prices can be volatile and are subject to market risks. As a social security recipient, you may want to consider investing in more established and stable companies to reduce the potential for loss.

Bonds are generally considered a lower-risk investment option compared to stocks. By investing in bonds, you are essentially loaning money to a company or government entity, which they promise to repay with interest at a future date. Government bonds are often seen as one of the safest investments because they are backed by the full faith and credit of the issuing government. However, it's important to note that bond yields may not always keep up with inflation, which can impact your overall returns.

Exchange-Traded Funds (ETFs) are another investment option that offers a diversified portfolio of stocks, bonds, or other assets. ETFs are traded on stock exchanges and can provide exposure to a particular market or industry. They tend to have lower fees compared to mutual funds and can be bought and sold throughout the trading day. ETFs can be a good option for investors who want more flexibility and diversification in their portfolio.

Real Estate Investment Trusts (REITs) are companies that own and operate income-producing real estate, such as office buildings, apartments, or malls. By investing in REITs, you can gain exposure to the real estate market without directly purchasing property. REITs offer several benefits, including regular dividend payments, potential for capital appreciation, and portfolio diversification. However, it's important to carefully research and evaluate the financial health and management of REITs before investing.

Before making any investment decisions, it's always recommended to consult with a financial advisor who can provide personalised advice based on your unique circumstances and risk tolerance. Additionally, remember that investing involves risk, and there is no guarantee of returns. Diversification and a long-term investment horizon can help mitigate some of the risks associated with investing.

Frequently asked questions