You might think that once your Social Security Disability Insurance (SSDI) application is approved, the worst part is over. But the complexities involved with this program extend further than that. There are many restrictions on the amount of money you can earn while receiving SSDI. But are there any restrictions on what SSDI benefits can be used for?
You can take comfort in knowing that there are no restrictions on what you can use your SSDI money for. However, if disability benefits are your primary income, then it’s advisable to spend that money carefully.
In the following sections, we’ll talk more about the type of expenses that you might typically use your SSDI benefits for.
How Much Does SSDI Pay?
There are a few things that the Social Security Administration SSA takes into account when calculating your disability benefits. The two main factors taken into consideration are the Average Indexed Monthly Income (AIME) and the Primary Insurance Amount (PIA). However, this calculation is quite complex and requires some level of expertise. If you’d like an estimate of the amount you can get through SSDI, then it’s best to turn to the SSA as they can provide you with a pretty accurate estimate.
For reference, the average SSDI benefit in 2023 is $1,483 per month, although those with high incomes in former years can earn up to $3,627.
Your Social Security Disability Insurance payment won’t change no matter where you live in the country. The Social Security Administration offers monthly disability payments between $100 and $3,627.
How SSA Calculates Your SSDI Amount
The first step is for the SSA to establish your AIME. The Social Security Administration will “index” your lifetime earnings in order to adjust for inflation in the pay market. This is done so that any future payouts you receive reflect this increase.
The Social Security Administration can take into account up to 35 of your working years.
To calculate a person’s Social Security benefit, the SSA sums up their indexed earnings from the years with the greatest totals, then divides that sum by the total number of months in those years. Your AIME is the result of rounding down the average.
Your Primary Insurance Amount, often known as your PIA, is the foundational component of the benefits you get. The SSA calculates PIA by adding together three predetermined percentages of your AIME. Calculated values are known as “bend points.” The bending points are adjusted annually to account for inflation and the general cost of living.
What Can SSDI Benefits Be Used For?
SSDI benefits are intended to provide financial assistance for people who are disabled and unable to return to work as a result of their disability.
If Social Security benefits are the only benefits you are receiving with no other money coming in, then it is highly advised that you spend this money carefully.
It’s important to be mindful of certain factors when spending your SSDI money, such as the types of expenses you can use it for. In this section, we’ve detailed all of these factors.
1. Expenses
With a few exceptions, technically speaking, there are no restrictions on how you can use your Social Security disability payment.
Having said that, you should definitely put some thought into how you spend your monthly benefit. Disability payments should be used for the following basic expenses first before being spent on entertainment and luxuries:
- Rent and utilities
- Food
- Other miscellaneous expenses
2. Representative Payees
The Social Security Administration may assign you a representative payee under certain circumstances. You may need a representative payee if you fall into one of the following categories while applying for benefits:
- Suffering from dementia or a mental illness
- Having a physical impairment that leaves them open to exploitation
- Having a drug or alcohol addiction
3. Benefits for Children
Children’s Social Security Disability Insurance provides monthly financial assistance to workers or their children who have contributed enough Social Security taxes to collect disability benefits in the event of a worker’s disability.
There are two methods through which grown children who are disabled or have specific medical needs can apply for and receive SSDI benefits. The first is when, if qualified, your child receives benefits due to their work history.
The second is for an adult child to get financial support from their parent’s pension and disability payments in the form of a child’s benefits.
Even though both options can help a child financially, they each have their own advantages and disadvantages. In any case, your child will be eligible for Medicare health insurance after they have been collecting SSDI benefits for a period of 24 months.
Your representative payee’s use of your disability benefits is subject to tight regulations.
If a child is receiving SSDI, for instance, their representative payee is required to set up a separate savings account in which any funds not used for basic necessities could generate returns.
4. Back Payments
Due to the amount of time that goes by between applying for and getting approved for Social Security disability benefits, you may be due substantial back payments. Thanks to this, some people who apply for back payments receive substantial sums of money all at once, sometimes as much as $20,000.
You should carefully consider how to invest this lump sum (particularly in light of the fact that doing so will affect your SSI benefits, if you are receiving them).
An individual’s representative payee is subject to stringent regulations on the use of a considerable back payment. The Social Security Administration specifies the following priorities for spending the money:
- Basic necessities including housing, food, clothing, and transportation
- Better medical care, powered wheelchairs, at-home care, rehabilitation, and other steps to enhance the quality of life
- Spending on things like a car or home modifications to make them accessible to someone with a disability
Conclusion
So, while there are no restrictions on what you use your SSDI for (other than generally unadvised things like drugs), it is still important to be careful and financially responsible when spending these benefits.
