Many people who receive Social Security Disability Insurance (SSDI) benefits find it difficult to manage their money once they finally qualify. But there are some things that can help to manage their money better.
To manage SSDI after qualification, beneficiaries have the option of applying for a representative payee who will take care of the money for them and use it for their best interest. There are also many money management tips that SSDI beneficiaries may want to incorporate into their spending.
Read below to find out what they are.
SSDI Overview
SSDI is a government program that helps disabled people who can’t work by providing financial assistance.
Workers contribute to SSDI through payroll taxes; think of it as insurance workers’ pay into during their working years. However, SSDI is not available for every kind of disability. The Social Security Administration has stringent guidelines for determining what constitutes a “disabling condition.”
To be eligible for SSDI, you need to show evidence of a serious, long-term, and total disability. Here, a condition is considered “severe” if it makes it difficult to do even the most fundamental tasks connected to one’s job. A condition is considered “long-term” if it has lasted for, or is expected to continue for, a minimum of 12 months. A “total disability” is one that, despite receiving reasonable accommodations, prevents a person from engaging in any substantial gainful activity to earn a decent enough living wage.
The amount of SSDI benefits you receive each month will not be based on how severely disabled you are but rather on your average lifetime earnings before the onset of your disability.
An attorney can help you get the most out of your SSDI benefits and ensure you receive the most assistance you are eligible for.
SSDI Qualifying Conditions
Planners for the SSDI program, which began in July 1956, deliberated long and hard before settling on a narrow definition of “disability.” That’s because they were trying to narrow down the pool of applications to those who were truly unqualified.
Those early planners defined a qualifying disability as “an impairment of mind or body which continuously renders it impossible for the disabled person to follow any substantial gainful occupation,” a condition that would likely last for “the rest of a person’s life.”
Even though this definition has been tweaked a bit in the 50 years that have passed since it was first introduced, the gist of its meaning has not changed. Nowadays, you have to have a total disability to get SSDI. You may qualify if your current health condition:
- Limits your ability to work or engage in substantial gainful activity;
- Limits your ability to carry out previous duties;
- Limits your ability to learn new tasks; and
- Has a high probability of lasting a year or more or of causing death.
To put it another way, a qualifying impairment refers to something that majorly impairs your ability to do simple tasks associated with work such as lifting, standing, walking, sitting, or remembering for at least a year.
The Social Security Administration has a list of conditions that qualify for benefits, but it’s important to remember that every situation is unique. The local Social Security office in your state will work with you to figure out if you qualify for benefits.
In addition, there are unique guidelines for those who are blind or have impaired eyesight, as well as for surviving spouses, divorced spouses, and children of SSDI beneficiaries who have passed away.
What Affects Disability Benefits?
SSDI amounts are based on several criteria. While your employment record is a primary consideration, other aspects of your life, such as your family, may also matter.
Some of the most important criteria are as follows:
Work Record
The Social Security Administration determines the primary insurance amount (PIA) based on your average indexed monthly earnings (AIME) during your working life. SSDI payouts are proportional to the recipient’s average lifetime earnings.
Disability Onset
The date the Social Security Administration determines your disability onset date is a major factor in determining both when your benefits will begin and how much they will be, especially if you are eligible for retroactive payments.
Age
The Social Security Administration bases your AIME partially on your age at the start of your disability.
Work Credits
The amount of your benefit is also based on the number of work credits you have earned over your working life. To qualify for and get these credits, your yearly income must be at a certain threshold.
Family
Your SSDI compensation may increase based on your family situation if your spouse or children are eligible for SSDI family benefits. You and your qualifying family members may share up to 180% of your monthly disability rate.
Earnings from Outside Activities
Your SSDI benefits may change if you get certain types of supplementary income. You may have your SSDI benefits reduced if you receive workers’ compensation or other public disability benefits.
5 Tips to Manage SSDI Benefits
Following are some tips to help you manage your SSDI benefits.
1. Household Expenses Come First
Unless you have a Social Security Representative Payee, you are solely responsible for managing your benefits, beginning with the first payment. You should pay your bills and fulfill your basic needs before splurging on entertainment, travel, or other non-essential purchases.
These benefits may be your only source of income, so you should be prudent with how you use them.
Your priority should be:
- Renting or buying housing
- Food
- Clothing
- Utilities
- Miscellaneous costs of daily life
After meeting these obligations, you can think about spending the rest of your Social Security disability check on other things.
2. Pay Off Past-Due Bills
When you’re dealing with a serious health issue, paying off past-due payments should be your next financial priority. This is especially true if you want to keep a good credit score. Credit card late fees and interest may soon add up to ridiculous figures. Paying off your debts is the best way to improve your credit and stop receiving harassing phone calls from your creditors in the future.
3. Upgrades to Your Home and Car
If you have a mobility-limiting physical disability, you may want to consider adapting your house to meet your needs. Think about:
- Putting up ramps in your entrances;
- Reducing height of kitchen and bathroom counters;
- Adding a bathtub or shower rails and other forms of safety measures;
- A hoist to raise your car; or
- Additional time-saving and hassle-free design elements
4. Don’t Spend Back Payments
Many claimants may get a lump sum payment of retroactive Social Security disability benefits, and this may amount to thousands of dollars. You shouldn’t go on a spending frenzy with this money unless you’re stocking up on necessities.
After paying your bills and covering other expenses, you may want to put any remaining funds into an account that pays interest.
5. Get a Representative Payee
A large number of senior adults are eligible for monthly benefits from Social Security or the Supplemental Security Income program. You may be unable to manage your benefits while confined to a nursing home or other institutional setting; however, this is not the same thing as needing a guardian.
If you need assistance managing your Social Security benefits, you or a loved one can apply to be a representative payee. The representative payee might receive the payment and utilize it to cover your expenses.
Your representative payee must maintain the beneficiary’s funds in a separate account from their own. In addition, they must spend every cent on the beneficiary’s best interests. The primary purpose of benefits is to cater to a recipient’s basic needs, which include food and housing, followed by medical care.
It is up to the discretion of the beneficiary to decide how to spend any leftover money.
The recipient of the benefits is obligated to keep records of both the benefits and how they are spent, and they will be questioned annually regarding the benefits. Payees must also record any life events that can affect the recipient’s benefits, such as a new address, a new job, marriage, incarceration, etc.
Requesting a Representative Payee
You can inquire on your own or have a trusted loved one, friend, or guardian do so. No court appearance is required. However, you must submit Social Security Form SSA-11-BK. You can reach out to the Social Security Administration by phone at 800-772-1213. Dial (800) 325-0778 to reach the TTY line.
You will also be required to provide Social Security with information from the previous year that demonstrates you have been having difficulty managing your affairs, such as the following:
- Legal papers (declaring incompetence)
- A note from the doctor
- Personal or family testimonials from you or others who know you well
There are cases where you won’t need all of those documents. For example, obtaining a court document is not always necessary.
However, a court judgment establishing the recipient’s incompetence is relevant for deciding whether to designate a representative payee for Social Security or Social Security Insurance benefits. The Social Security Administration will appoint a representative payee if they believe that you require one.
Who Qualifies as a Representative Payee?
The applicant has the option of suggesting a representative payee of their choosing to the Social Security Administration. Applicants who need to have a representative payee tend to have someone in mind, such as a parent, child, or close friend, from whom they would like to receive their benefits.
A nursing home, social services organization, or even an attorney can take on the role of representative payee.
While the applicant does get to make a recommendation for a representative payee, the Social Security Administration ultimately makes the final decision. However, the applicant does have the option of requesting a new payee if they disagree with the Social Security Office’s initial selection.
How to Maximize Your Social Security Disability Income
Increasing your earnings during your career and before you become disabled is one of the simplest things you can do to maximize the amount of money to which you may be entitled.
When calculating your SSDI benefits, the Social Security Administration uses a complex formula. It considers both the number of years you’ve spent working and how much money you’ve made.
Workers earn “work credits” equal to a percentage of their annual salary for each year they contribute to the economy. You can earn up to four credits each year, one for every $1,360 you earn. If you become disabled in the future, asking for a raise or getting a second job now can help you get more money.
File Immediately
The amount of Social Security Administration benefits you receive can go up or down depending on your income and employment history. You want to put in as many years as possible before a disability forces you to stop working.
But once your illness worsens and causes you to miss significant time from work, you should start the process of filing your claim right away.
Start Working Part-Time
It is a common misconception that Social Security disability beneficiaries are not allowed to work. As long as you don’t participate in what the Social Security Administration considers to be substantial gainful activity, you can earn up to $1,470 per month if you have a basic disability or $2,460 if you are blind.
Find Help with Your Application
One of the most common causes of people not receiving their full SSDI benefit amount is incorrectly filled-out applications. If you’re applying for SSDI, you’ll need to make sure your medical records from several different doctors show that your condition qualifies for benefits. Be as detailed as possible about how it has altered your life and rendered you unemployed.
Working with an attorney who specializes in Social Security disability benefits can also greatly increase your chances of being approved and getting the full benefits that you deserve.
Conclusion
With rising inflation, it can be difficult to manage your finances, and even more so if you are disabled and have to rely on SSDI benefits. But, with some smart money management and careful planning, you can responsibly manage your money and make the most of your benefits.
