Dear Penny: Will Getting a Job Cost Me My Social Security Disability?

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Dear Penny,

I receive full disability from Social Security. I am 64 and went out on disability at 48 years old. (I was born in 1957.) 

Since there is now a shortage of labor, I thought I might like to try going back to work. Social Security has a Ticket to Work program, which gives you a limited time to try working without losing your benefits. Is there a downside in trying to go back to an office job? I believe I can work part time and earn less than $1,000 a month without disturbing my benefits. 

Also, right now, I do not pay any income tax. Would I really be gaining anything if I went back to work just to have a tax bill wipe out my earnings?

-L.

Dear L.,

Getting approved for Social Security Disability Insurance (SSDI) is such a long and complex process, so I understand why you wouldn’t want to put your benefits at risk. But I don’t see much downside to what you’re proposing.

The Ticket to Work program provides training, career counseling and help with finding a job for people who receive disability and want to work again. You can find out more about the services the programs offered at choosework.ssa.gov.



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But you don’t need to use Ticket to Work’s services to qualify for a trial work period. Basically, as long as you still have a disability, Social Security lets you test out a new job for up to nine months without affecting your benefits. There’s no limit on how much you can earn during these nine months.

As of 2022, any month you earn above $970 or work at least 80 hours if you’re self-employed would count as one of your trial months. Social Security would only consider your disability to have ended if you used up nine trial months during a 60-month period. But as long as you kept your income below $970 for any month you work, it wouldn’t count as a trial month.

Once you’ve completed a nine-month trial period, you can keep your disability for any month in which you don’t earn enough to have what Social Security calls substantial gainful activity for the next 36 months. In 2022, you can earn up to $1,350 a month, or $2,260 per month if you’re blind. There’s no middle ground here, though. If you’re not blind and you make $1,351 in a month, you wouldn’t get your disability for that month.

Even if you’d use up nine trial months, you’re not putting your long-term benefits at risk because of your age. You’re about two years away from full retirement age, at which point your disability benefit will convert to your retirement benefit. After that, you can work as much as you want without impacting your Social Security. You also wouldn’t risk your Medicare, since you’ll be 65 this year.

A couple of other benefits to consider: By working, you’d be paying into Social Security, which could increase your retirement benefit. Also, when you earn money from a job, you can contribute to a retirement account, like a 401(k) or IRA.

The tax part of the equation complicates things a bit. While you’d likely wind up paying some taxes, I don’t think Uncle Sam would take too big of a bite. We have a progressive tax system that gradually increases tax rates according to income.

Suppose you have $20,000 of income from Social Security disability, plus $10,000 in wages for the year, bringing your income to $30,000 for the year. Between federal taxes (which would apply to both your earnings and part of your Social Security) and payroll taxes (which would only apply to your earnings), you’d wind up paying a little over $1,500.

Ultimately, it’s your call whether getting a job is worth owing a bit in taxes. The point is, you don’t have to worry about taxes eliminating the benefits of working.

As long as you feel like you can work without risking your health, I’d vote for at least applying for a few jobs to explore your options. Along with office jobs, you may also want to look at work-from-home jobs since remote work is the new normal for so many companies.

The current job market presents so many opportunities, particularly for older workers or those with a disability who often face a lot of barriers when they seek employment. Since you have options for working without risking your benefits, why not take advantage?

Robin Hartill is a certified financial planner and a senior writer at The Penny Hoarder. Send your tricky money questions to [email protected].