Understanding how disability benefits support daily living is an important, but often overlooked, part of financial planning. When you are coping with a disability, it is easy to feel uncertain about what these benefits actually cover and how they can best be used.
Disability benefits provide vital financial stability for individuals unable to work due to a disabling medical condition. These monthly benefits can help manage everyday costs, medical expenses, and other essentials that support independence and quality of life.
However, not all disability programs are the same. Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI) both offer financial assistance, but the spending rules and eligibility requirements differ significantly. Understanding these distinctions can help you make informed financial decisions and avoid unintended eligibility issues.
Understanding SSDI and SSI Benefits
The Social Security Administration (SSA) provides two main types of disability programs:
- SSDI (Social Security Disability Insurance): Based on your work history and earnings, funded through payroll taxes
- SSI (Supplemental Security Income): A needs-based program for individuals with limited income and resources
Both programs provide monthly payments to help cover living expenses when a disability prevents full-time work, but they operate under very different financial rules.
SSDI vs. SSI: The key differences
SSDI is insurance-based, meaning your benefit is tied to your prior work and FICA contributions. There are no restrictions on how SSDI funds are spent. SSDI recipients also qualify for Medicare after a 24-month waiting period.
SSI is needs-based and includes strict resource and income limits. It’s often paired with Medicaid, which covers essential healthcare costs. SSI recipients must be cautious about their savings and spending to remain eligible.
Spending Your SSDI Benefits: Flexibility and Freedom
SSDI benefits are income that can be used at your discretion. You can use them as you would any paycheck to meet your needs and goals.
Rent, mortgage, or housing costs
Many recipients use SSDI to pay rent, mortgage payments, or utilities, in the same way they would use income from work. You do not need to provide statements to the SSA indicating how you spend your SSDI; it is your money, and it is for you to manage according to your needs.
Food, groceries, and daily living needs
SSDI can cover groceries, household supplies, or dining out. It can also cover splurges. There are no limits or reporting requirements for these expenses.
Transportation and debt payments
Your benefits can fund car payments, gas, insurance, public transportation, or even paying down debt and credit cards. Unlike with SSI, you can own or buy multiple vehicles using your SSDI income. The value of your vehicles does not impact your SSDI eligibility.
Saving, investing, or other financial goals
Unlike SSI, SSDI recipients can save or invest their benefits freely. You can build emergency savings, contribute to retirement accounts, invest in property or stocks, or pursue education without affecting your eligibility.
SSI: Spending Rules and Eligibility Concerns
While SSDI offers flexibility, SSI comes with rules designed to maintain its needs-based structure. This is because SSI is a means-tested benefit for low-income disabled beneficiaries. The income is meant to provide a basic level of income for the indigent to cover necessities such as food and shelter.
What SSI benefits cover
SSI benefits are often used for basic needs such as rent, food, clothing, and personal care. Recipients are free to choose how they spend their monthly benefit, but they must remain under strict financial limits. While an SSI beneficiary can use their benefit to invest in things like stocks and bonds and interest-bearing savings accounts, if the value of the asset rises above the SSI income test, these investments could cause a discontinuation of SSI benefits.
How resource limits affect what you can keep or save
To stay eligible for SSI, your total countable resources must not exceed $2,000 for an individual or $3,000 for a couple. This includes money in checking and savings accounts, investments, or other assets that could be converted to cash.
Using SSI with Medicaid
One of SSI’s most valuable features is automatic eligibility for Medicaid, which provides comprehensive healthcare coverage, including prescription drugs and long-term care services that Medicare may not cover.
Disability-Related Expenses: When They Matter Most
Beyond daily living costs, disability benefits can also support medical and adaptive needs that enhance quality of life.
Medical and therapy costs (covered partly by Medicare/Medicaid)
While Medicare (for SSDI) and Medicaid (for SSI) cover most medical expenses, you may still have copayments, therapy sessions, or specialized care needs that are not fully covered.
Assistive technology, devices, and service animals
Disability benefits can help cover costs for wheelchairs, prosthetics, hearing aids, or service animals that improve independence and functionality.
Home or vehicle modifications
You can use your benefits to install ramps, stair lifts, or modify vehicles for accessibility, investments that promote safety and mobility.
Work Incentives and Impairment-Related Work Expenses (IRWEs)
Here’s where “allowable expenses” actually come into play, when you are working or trying to return to work while receiving benefits.
What are work incentives?
Work incentives are SSA programs that let you earn income while still receiving some or all of your benefits. They encourage people to test their ability to work without losing vital support too quickly. For more information about working while on Social Security disability, check out our blog article.
How IRWEs reduce countable income
If you pay out-of-pocket for disability-related expenses necessary for you to work, those costs, also called Impairment-Related Work Expenses (IRWEs), can be deducted from your income for SSA’s calculations. This is important when the SSA is making a determination about whether any work you are performing rises to substantial gainful activity levels (work), or if the work should be used as one of your nine trial work period months.
Examples of allowable IRWEs
Allowable IRWEs cover a range of supports and adaptations that enable you to work, including:
- Attendant care services
- Adaptive equipment or prosthetics
- Specialized transportation
- Home modifications related to work access
Reporting IRWEs to the SSA
Keep receipts and documentation for all IRWEs and report them to the SSA regularly. Doing so ensures you are credited for these deductions and helps maintain accurate benefit calculations.
Planning Ahead: Managing Disability Benefits Wisely
Being proactive with your financial planning can greatly improve how you manage disability benefits. There are several resources and methods designed to support your budgeting and savings goals.
ABLE accounts
SSI and SSDI recipients can open ABLE (Achieving a Better Life Experience) accounts, which allow individuals with disabilities to save up to $100,000 without affecting SSI eligibility. These funds can be used for qualified disability-related expenses such as education, housing, or healthcare.
Budgeting and financial tools
Setting up a simple budget can help you plan monthly expenses, manage savings, and ensure your benefits last. Consider automatic bill payments or a separate savings account to stay organized.
Social Security disability benefits are meant to help you live as independently and securely as possible. Whether you are managing SSDI with full spending freedom or SSI with stricter rules, knowing how to make the most of your benefits can make all the difference.
The Social Security disability process can feel overwhelming, especially after a denial of benefits. If you are considering filing an application or pursuing an appeal, LaPorte Law Firm can help you take the next step with confidence. And if you are already receiving benefits, be sure to explore our past blog posts for practical guidance on managing your disability income and related issues.
FAQs
Yes. Both SSDI and SSI benefits can be used for housing and utilities, though SSI recipients must track their total resources to remain eligible.
Yes. SSDI recipients often use Medicare, and SSI recipients typically use Medicaid, but benefits can also cover out-of-pocket medical or therapy costs.
You can use your benefits for any personal or household expenses, including groceries, car payments, or public transportation.
For SSDI, there are no spending limits. For SSI, limits apply to what you own and save, not to what you spend your monthly benefit on.
