Money that isn’t regular income often comes with strings attached. You can’t get a business loan and spend it on your personal boat. You can’t take HSA funds and buy a new TV. What about Social Security Disability Insurance benefits? Are there limits on what you can spend SSDI benefits on? It’s an interesting question and Tabak Law can provide the answers.
Does the Government Monitor SSDI Spending
Legally speaking, you can spend your SSDI money on whatever you want. Social Security Disability Insurance benefits are paid from payroll tax funds and the amount you earn in benefits is based on what you paid through your individual payroll taxes.
It’s not a 1-to-1 correlation like it would be with say a 401k. Most people, especially those that go on SSDI, will earn more in Social Security income than they paid in, and this is by design. We could provide a more in-depth explanation, but to keep it simple, the people that pay today, are paying for the people currently on Social Security disability and retirement benefits. It’s not like a savings account, but rather paying for the privilege to have others pay the same for you when you retire or become disabled.
What Should You Spend SSDI Money on?
We are not here to tell you what to spend your money on, but since you asked we can provide our thoughts. Again, legally speaking, you can spend it on whatever you want, but you should have some priorities. Focus on the essentials first, housing, utilities, and food, then worry about your little luxuries.
Does the Government Monitor SSI Spending?
If you are a recipient of Supplemental Security Income, then know that it works very differently than SSDI. SSI recipients are not allowed to have more than $2,000 in assets (beyond your house, vehicle, and other exclusions). This can mean that if you spend your money on luxury items you will lose your benefits. Spending benefits on illegal items or services can also result in you losing your benefits.
What is a Representative Payee?
In certain cases, people receiving Social Security benefits may be deemed unfit to handle money. Generally, this is the case with people who are mentally ill, have dementia, are addicted to drugs or alcohol, are at risk of being taken advantage of, and children.
A representative payee, which is assigned by the Social Security Administration, will handle all payments on your behalf. In these cases, they have to follow strict guidelines for where your money can go.
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