Contributions to Retirement Accounts and Self-Employment While Receiving Social Security Disability

By / After You’re Social Security Disability Benefits are Approved / 19 Comments

Learn how retirement account contributions and self-employment relate to your claim for Social Security Disability benefits.

Dear Disability Advisor,

I am a disabled veteran getting navy retirement, VA compensation and pending SSDI. I have been out of work for 1.7 years and although I cannot return to work in a traditional office or work full time I would like to do independent contract work from home. The work is very intermittent and only a few hours a week, but occasionally it may end up being above SGA. I would like to put my earning into an individual 401K so that I have a cushion in the future; it would also lower my taxes and I was wondering since I would not be claiming these earning would it also lower what I report to SSA so my SGA would be lower or maybe even nothing since I can contribute $24,000 of earnings? Thanks Kelly

Dear Kelly,

Your contributions to a retirement plan will not lower your earnings when your work activity is evaluated for substantial gainful activity (SGA). Net profit and if you have been disabled for less than twenty-four months the number of hours worked per month, essential nature of services to the business, and other factors are considered in the evaluation of self-employment. In 2018, $1,180 net profit from self-employment is the dollar benchmark for SGA except for individuals who are blind or legally blind, whose benchmark is $1,970.

You need to report the work when you start. If you are approved, you will be asked for your gross earnings and net profit. Because compensation for self-employment services is not always received in the months in which the services are performed, receiving a substantial payment in one month may not mean that you earned it all in that month, so keep a work-activity log (dates and hours worked). If you are approved for Social Security Disability (SSD aka SSDI), discuss with a claims representative how to report your variable work activity and earnings other than submitting a copy of your self-employment tax return annually.

Do keep in mind that if some months are determined to be Trial Work Period (TWP) months, that is, months that you have net  earnings of $850 or more, at the end of the nine TWP months, for the next thirty-six months, which is called the Extended Period of Eligibility, you will not be paid for any month you perform SGA. After the end of the EPE, if you perform SGA for even one month, your claim will be closed.

Kay Derochie

Contributions to Retirement Accounts and Self-Employment While Receiving Social Security Disability
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