SSI is a poverty program. To receive SSI, you must show that you are “disabled,” but also that you are “poor,” as defined by Social Security. It is exclusively for people who are both disabled and poor.
To determine whether a person is poor enough for SSI, Social Security looks at “resources” (or assets), and income (earned and/or unearned).
A potential SSI recipient cannot have more than $ 2,000.00 in personal resources and still receive SSI. Period. This is a hard-line rule. It does not matter how severe the disability is, or how hard-luck the story, a person with $ 2,000.00 or more in assets is simply too wealthy to receive SSI.
Resources are cash, bank accounts, stocks, bonds, certificates of deposit, life insurance with a cash-surrender value, personal property, automobiles (apart from one you need for transportation) and real property that the disabled person does not live in.
Resources is an all-or-nothing proposition. If you have over $ 2,000.00 in resources you get no SSI whatsoever. Period.
To illustrate the point from real life, I once had a client who was 52 years of age, mentally retarded, and had a severe heart condition. This client had never been able to live independently, had always lived with parents, and had never been able to work. When the client was an infant, the client’s father had purchased a life insurance policy with a cash surrender value of over $ 2,000.00. The policy was just sitting there, but made the client “over resource” and therefore, ineligible for SSI benefits.
The inquiry about income is not as cut and dried as the all-or-nothing proposition of resources. Income does not necessarily preclude receipt of SSI benefits, but having any will almost always cut the benefit amount. The SSI benefit is cut based on the amount of income and the type of income, that is, whether it is earned income or unearned income, or “in-kind” support, such as being allowed to live in a relative’s home rent free.
To determine how reductions in SSI benefits are calculated, let’s start with the full SSI benefit before reductions – $ 710.00 per month. This is the most an SSI recipient can receive in 2013. SSI recipients cannot request a higher benefit amount based on financial hardship or severity of a disability.
Social Security reduces SSI benefits for unearned income by subtracting $ 1.00 for every $ 1.00 received from any other source – after the first $ 20.00. Social Security will not reduce the benefit for just $ 20.00 received from an outside source in a given month, but after that first $ 20.00, the benefit is reduced dollar-for-dollar. The thinking is that if a disabled and impoverished person has other support, such as from family, then the SSI program, and therefore taxpayers, do not have to provide it.
So, if an SSI recipient is given $ 100.00 for his or her birthday, Social Security would reduce the SSI benefit for that month by $ 80.00. ($ 100.00 – $ 20.00 = a reduction of $ 80.00.)
The formula for calculating reductions of SSI benefits when the income is earned, i.e., as the result of work activity, is a tad more complicated, and is designed to incentivize working. The hope is that the disabled person could find his or her way into the world of work, and into financial self-sufficiency.
For earned income, the first $ 85.00 of gross wages (not take-home pay) is exempt. But, after that, Social Security subtracts .50 cents for every $ 1.00 of gross wages earned from the benefit. The rule is : 50% reduction of SSI for earned income, after the first $ 85.00 of gross wages.
So, if an SSI recipient earns $ 100.00 (gross), Social Security would reduce the SSI benefit for that month by $ 7.50. ($ 100.00 – $ 85.00 = $ 15.00, divided in half = $ 7.50.)
The formulation for earned income incentivizes work, gently pulling the support away from the disabled person as their earning power increases.
But, it is fraught with cumbersome requirements that disabled SSI recipients report their earnings to Social Security monthly – which creates headaches for SSI recipients, and for the Social Security workers who must recalculate benefits monthly based on the fluctuating monthly earnings of SSI recipients who are attempting to work. Many believe that Social Security is automatically notified of workers’ earnings because Social Security payroll taxes are being withheld, but that is not true.
SSI recipients must also report to Social Security any changes in their living circumstances or marital status because those events could change the amount of the SSI benefit properly to be received. For example, if an SSI recipient were to marry and the spouse was working, the SSI benefit would be reduced based on the spouse’s income.
Living on even the full SSI benefit amount of $ 710.00 per month is difficult, and many SSI recipients live on reduced amounts. Furthermore, SSI benefits do not have Medicare health insurance coverage. So, not only are recipients of SSI surviving on a very thin, fixed income, they do not have health insurance through Social Security. It is not an easy life.
In my experience, recipients of SSI are grateful for the basic support it provides, but by no means would choose it if they were able to work. Life on SSI is not an enviable life. It is an impoverished, difficult life – not in the least enviable. The idea that people are clamoring for this modest benefit, and willing to commit fraud for its acquisition is not borne out in reality.