Investments: An Important Income Source for People with Disabilities

If you receive Social Security benefits due to a disability, there’s a strict limit on how much income you can earn each month from working before you risk losing your benefits. Still, there’s no limit to the amount of unearned income you can have, which means investments can be a valuable way to build wealth. 

What Is Social Security Disability Insurance?

According to the Social Security Administration (SSA), “Social Security pays benefits to people who can’t work because they have a medical condition that’s expected to last at least one year or result in death.”  

To qualify for disability benefits, you must meet two earnings tests:

1. A Recent Work Test: This earnings test proves that you worked a certain amount of time in the three- to 10-year period (based on age) before you became disabled. 
2. A Duration of Work Test: This test measures the amount of time that you worked over your lifetime. In general, you can subtract the year when you turned 22 from the year when you became disabled to determine the number of work quarters that you need to meet the duration requirement.

In addition to the two earnings tests, the SSA considers the following when making its determination: your medical condition, when it started, how it limits your activities, your medical test results, and the medical treatments you’ve received. 

If you qualify for benefits, you will continue to receive them until you return to work on a regular basis. If you are receiving disability benefits when you reach full retirement age—67 for people born in 1960 and later—your disability benefits will automatically convert to retirement benefits. The benefit amount will remain the same. 

Income Limits for Social Security Disability Benefits

For 2022, the monthly income limit is $1,350 for non-blind and $2,260 for blind people. These amounts increase to $1,470 and $2,460, respectively, for 2023. If you can earn more than these amounts, then the SSA deems you capable of engaging in “substantial gainful activity,” which prevents you from qualifying for benefits. 

If you work while receiving SSD benefits, you have to report that income to the SSA, no matter how little you earn. During a trial work period of up to nine months (not necessarily in a row), you can have unlimited earnings and still receive full benefits. Once the trial work period is over, the SSA will determine if you’re still entitled to disability benefits.

“SSD recipients are allowed to earn some income for a limited time and limited amount, mainly to fully test their potential ability to return to work and leave the SSD rolls,” says David Gantt, an Asheville, North Carolina, lawyer who handles a large volume of SSD cases. “Once these very limited times and amounts are exceeded, the Social Security Administration will review any reported income and make [an] inquiry and/or an investigation.”  

SSD Benefits and Investment Income

Income can be earned or unearned. Earned income is money that you make while actively working, for either an employer or yourself. It includes wages, salaries, tips, bonuses, net earnings from self-employment, contract work, certain royalties, and union strike benefits. This type of income counts against your monthly maximum for SSD eligibility.

Unearned income is money that you make or receive through something other than employment or active work, and it doesn’t count against the monthly income limits.

Examples of unearned income include:

• SSD Benefits
• Pensions 
• Gifts
• Inheritances
• Dividends
• Interest

“Some of our clients who receive SS disability checks (SSD) also have investment income from financial documents (stock, trusts, bonds), rental property, or other passive income sources,” says Gantt. 

Keep in mind that if you have investment income, the SSA is likely to want a closer look. “Current technology helps flag questionable investment income info,” says Gantt. “I tell my clients who move in [the] investment arena to expect questions and [a] review.” 

One way to prepare for questions is to use an affidavit. “Financial investments are generally passive by nature. For true passive income earnings, we encourage SSD clients to be prepared to sign affidavits that they took no action on the investment income subject that could convert the income to the earned legal category,” says Gantt. 

Investments That Don’t Jeopardize SSD Benefits

Someone who receives SSD benefits can invest in securities such as stocks, bonds, exchange-traded funds (ETFs), and real estate investment trusts (REITs) without jeopardizing their benefits. Dividend income from stocks, as well as other sources of passive income, is OK as far as the SSA is concerned because it’s unearned income.

“The key is whether the investment income is earned or not,” says Gantt. “Passive income is not earned in the legal meaning of SS law and not counted as evidence of an ability to work.” 

Is Real Estate Income Earned or Unearned?

Income from real estate investments can count as earned or unearned, depending on the situation. If you want to invest in real estate, you can buy real estate stocks, funds, and REITs without jeopardizing your benefits, as these investments provide a passive (unearned) income source.

But what about buying physical real estate, such as a rental property? “Actually, ownership of rental property without any activity has been approved and authorized in some cases we handled,” says Gantt. “However, most landlord-owners are also taking actions (remodeling, plumbing, electrical, mowing, etc.) that push resultant income from passive to earned income.”  

Because real estate investments can be a bit of a gray area, “we encourage clients to determine the passive vs. earned income appearance and proof considerations before starting investment income,” says Gantt. “[Our clients] are cautioned that active participation in rental property can lead to a finding that the existing disability has lifted, and [they] are no longer SSD eligible.”  

If you are interested in investing in physical real estate—and preserving your SSD benefits along the way—plan on speaking with an experienced disability attorney who can help ensure that any income remains passive. Otherwise, it’s best to stick with real estate stocks, funds, and REITs. 

The Bottom Line

If you collect SSD benefits in 2022, you could have had up to $1,350 ($2,260 you're blind) in monthly earned income without risking your benefits. For 2023, the monthly income limit is $1,470 ($2,460 if you're blind) without risking your benefits.

Meanwhile, the estimated average Social Security disability benefit is $1,364 per month, according to data from the Social Security Administration (SSA). Combined, that's $2,714 per month ($1,364 + $1,310), or approximately $32,000 for all of 2022—an amount that might fall short of what's needed to live comfortably.

Investment income—provided it's unearned—can offer a valuable opportunity for people with disabilities to buffer their budgets and build wealth. If you have questions about SSD eligibility or need help with affidavits to show that you took no action on investment income, contact an experienced disability attorney in your area or online.