Spending Disability Benefits
If you have become disabled and are unable to work and support yourself financially, you may be able to receive disability benefits through the Social Security Administration (SSA).
If these payments are your only source of income, it is important to be careful of what you choose to spend your benefits on. Keeping certain factors in mind will ensure that you keep your disability benefits and finances in order.
Types of Expenses
Technically, there are no limits to what you can spend your social security disability benefits on (with a few exceptions). This is especially true if you are receiving Social Security Disability Insurance (SSDI) benefits, which are based on employment history and paid into through your payroll taxes.
However, it is highly recommended that you spend them wisely. Before purchasing luxury items and entertainment, disability benefits should go towards expenses such as:
- Utility payments
- Other everyday living expenses
If you receive Supplemental Security Income (SSI), the form of disability payment that is financial need based, you need to be careful about remaining eligible.
As an SSI recipient, you can’t have over $2,000 in assets, or $3,000 if you are a married couple. So if you spend your disability payments on luxury items and it increases your amount of assets, you could lose your disability benefit eligibility.
Also note that you cannot spend your benefits on illegal items or activities. If you do so, you will lose your disability benefits.
In certain cases, the SSA will appoint a representative payee to your case. This is a person who handles your benefit payments on your behalf, and may be necessary for applicants who are:
- Mentally ill or have dementia
- In a physical condition that makes them vulnerable to someone who would take advantage of them.
- Addicted to drugs or alcohol
Representative payees must follow strict guidelines when spending your disability benefits.
For example, for children receiving SSI benefits, the representative payee must open a dedicated, interest-bearing savings account for the remainder of the payments that aren’t immediately spent on medical expenses and living needs.
The application process and approval for social security disability benefits is lengthy, and as such, you may be entitled to back payments over a long period.
This results in certain applicants getting large lump sum back payments, sometimes as high as $20,000. It is important that you use this lump sum wisely (especially to maintain your SSI eligibility, as mentioned above).
If you are a representative payee for someone who has received a large back payment, there are strict guidelines on what to spend it on. The SSA outlines that you spend the amount in the following order of necessity:
- Current needs, such as rent, food, clothing, utilities, and similar items
- Improving living conditions, such as upgraded medical care, motor wheelchairs, at-home assistance, therapy, and more
- Special purchases, such as home improvement and repair to make a home more accommodating to their disability, and car payments
Getting Help with Your Disability Benefits
If you are concerned about what you are able to spend your disability benefits on, or have questions about representative payees and maintaining your SSI eligibility, consider seeking the help of a disability benefits lawyer or advocate.