Oct 21, 2024
If you’re disabled but have a lot of money stashed away in savings and investments, should you apply for Social Security disability benefits? Let’s take an example: a 62-year-old man has been deemed legally blind and can no longer work, so he’s considering early retirement.
Fortunately, he has a $1.5 million nest egg to help fund his golden years. However, since he’s legally disabled, he’s also thinking about applying for disability benefits. Despite having medical documentation to prove he’s blind, he’s worried his large savings might disqualify him. So he’s wondering: “Should I even bother?”
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In short, yes. If you’ve worked long enough and paid into Social Security, you’re eligible for Social Security Disability Insurance (SSDI). The program has no asset limits, meaning it doesn’t matter if you have $1.5 million in the bank, a hefty 401(k) or a major inheritance. While age may affect your benefit amount, your assets won’t.
Now that we’ve cleared up the issue of assets, let’s talk about how to qualify for SSDI in the first place. The main factors are your work history, the severity of your disability and whether you meet the Social Security Administration’s (SSA) criteria. Here’s what you need to know.
How to qualify for SSDI
Disability benefits begin five full months after your alleged onset date (AOD) — the date you became disabled. Your payment will start within the sixth month, but you may also be eligible for retroactive benefits, covering up to 12 months before your filing date. The amount you receive is based on your average lifetime earnings before your disability. In 2024, the maximum SSDI benefit is $3,822 per month, with an average of around $1,537.
To be eligible for SSDI, you must have paid into the system through payroll taxes. This means stay-at-home parents may not be eligible for SSDI, but there is another option: Supplemental Security Income (SSI). SSI provides basic financial assistance to people with disabilities who have limited income and resources.
Similar to retirement benefits, you need to earn credits to receive disability benefits. You can earn up to four credits per year (one credit for every $1,730 in wages per quarter). The number of credits for disability benefits depends on your age. For instance, if you’re under 24, you’ll need six credits in the three years before your AOD. If you’re 31 or older, you’ll need at least 20 credits over 10 years.
In addition, you must prove you have a medical condition that meets the SSA’s definition of a disability. This means you can’t perform substantial gainful activity (SGA) due to your medical condition, you can’t return to your previous work or adjust to other work and your condition is expected to last at least one year or result in death.
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If you can still work and earn more than $1,550 per month (the SGA limit), you won’t qualify as disabled. However, you still work and earn less than that amount while receiving SSDI. Special rules apply for people who are blind or have low vision (vision in both eyes is 20/200 or worse). For example, legally blind people can earn up to $2,590 per month and still receive benefits.
Once you reach full retirement age, SSDI benefits will convert into retirement benefits.
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What happens when you retire?
This 62-year-old man is eligible for SSDI because he’s paid into the system throughout his working life. Since he’s legally blind, he can continue working while collecting SSDI as long as he earns less than $2,590 per month. He can do that until he reaches full retirement.
He might how claiming SSDI will affect his Social Security retirement benefits. When you reach full retirement age — between 66 and 67, depending on your birth year — your SSDI benefits automatically convert to retirement benefits.
There’s a “disability freeze” rule that applies if you’re legally blind and continue working without claiming disability benefits. If your earnings drop due to your disability, the SSA can exclude those lower-earning years from your retirement benefit calculation, potentially increasing your benefit.
It’s important to note that you can’t receive both retirement and disability benefits simultaneously. However, once your SSDI converts to retirement benefits, the amount will remain the same. The 62-year-old man can count on a stable benefit for life, supplemented by his $1.5 million in savings.
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Vawn Himmelsbach is a veteran journalist who has been covering tech, business, finance and travel for the past three decades. Her work has been featured in publications such as The Globe and Mail, Toronto Star, National Post, Metro News, Canadian Geographic, Zoomer, CAA Magazine, Travelweek, Explore Magazine, Flare and Consumer Reports, to name a few.
