Planning for retirement while on Supplemental Security Income (SSI) or Social Security Disability Insurance (SSDI) can be challenging, as disability benefits are designed for financial support before traditional retirement age. However, with the right savings strategies, investment options, and an understanding of how retirement affects your benefits, you can secure a stable financial future.
This guide covers key considerations and strategies to help individuals on disability benefits prepare for retirement effectively.
1. How Disability Benefits Transition to Retirement Benefits
If you receive SSDI, your benefits will automatically convert to Social Security retirement benefits once you reach full retirement age (FRA).
There is no reduction in monthly benefits when this happens.
FRA depends on your birth year (typically between 66 and 67 for most people).
You do not need to apply for retirement benefits separately.
For SSI recipients, turning retirement age means:
You may qualify for Social Security retirement benefits if you have sufficient work credits.
If not, you can continue receiving SSI, but payments could change depending on other income sources.
📌 Tip: If you qualify for both SSDI and SSI, your SSDI will convert to retirement benefits first, and SSI will adjust based on new income calculations.
2. Retirement Savings Options While on Disability Benefits
Saving for retirement can be difficult while receiving disability benefits due to income and asset limits (for SSI recipients). Here are a few ways to save without jeopardizing benefits:
A. ABLE Accounts
ABLE accounts allow individuals with disabilities to save up to $18,000 per year (2025 limit) without affecting SSI or Medicaid.
Funds can be used for housing, healthcare, and retirement-related expenses.
Balances under $100,000 do not count toward SSI’s $2,000 asset limit.
B. Special Needs Trust (SNT)
An SNT allows savings to be managed by a trustee without disqualifying someone from SSI or Medicaid.
A Third-Party SNT is ideal for family members who want to contribute to your future financial security.
Funds can be used for supplementary needs like medical expenses and long-term care.
C. Individual Retirement Accounts (IRA)
If you worked before receiving SSDI, you may have a 401(k) or IRA that continues growing.
Traditional IRAs and Roth IRAs are options, but contributions must come from earned income.
If you receive only SSI, you cannot contribute to an IRA due to earned income restrictions.
📌 Tip: If you worked before disability, check whether your employer-sponsored retirement plans allow penalty-free withdrawals after reaching disability status.
3. How Work Affects Disability Benefits Before Retirement
If you plan to work while receiving disability benefits before retirement, it's important to understand earnings limits and work incentives.
A. SSDI Work Incentives
SSDI recipients can work under a Trial Work Period (TWP) and earn any amount for up to 9 months without losing benefits.
After TWP, the Substantial Gainful Activity (SGA) limit in 2025 is $1,620 per month ($2,700 for blind individuals).
If earnings exceed SGA for an extended period, SSDI benefits may stop.
B. SSI Work Incentives
The first $20 of any income is not counted, and the first $65 of earned income is excluded.
After that, SSI benefits are reduced by $1 for every $2 earned.
The Plan to Achieve Self-Support (PASS) program allows SSI recipients to save money for retirement without losing benefits.
📌 Tip: Working part-time and using SSA work incentives can help you save for retirement while maintaining benefits.
4. Planning for Healthcare Costs in Retirement
Medical costs often rise in retirement, so it’s crucial to plan for healthcare coverage and long-term care expenses.
A. Medicare and Medicaid Considerations
SSDI recipients qualify for Medicare after 24 months of disability benefits.
If you have both SSI and SSDI, Medicaid may help cover costs Medicare doesn’t.
Consider Medicare Advantage plans to reduce out-of-pocket expenses for prescriptions and medical services.
B. Long-Term Care Planning
Medicaid may cover long-term care services, but asset limits apply.
Long-term care insurance can help, but policies are expensive and may have pre-existing condition restrictions.
Pooled Special Needs Trusts can help manage long-term care savings without impacting benefits.
📌 Tip: If you’re approaching retirement age, compare Medicare Supplement (Medigap) plans for better coverage options.
5. Key Takeaways for Retirement Planning While on Disability
SSDI automatically converts to Social Security retirement benefits at full retirement age, with no change in amount.
SSI recipients may continue receiving SSI or transition to Social Security retirement benefits if they qualify.
ABLE accounts and Special Needs Trusts allow saving for retirement without affecting disability benefits.
Understanding work incentives can help maximize earnings before retirement without losing SSDI or SSI.
Plan for increased healthcare costs with Medicare, Medicaid, or long-term care options.
6. Plan Your Retirement with Confidence Using Purple
Retirement planning on disability benefits requires careful financial management and understanding of benefit transitions. Purple helps you track income, savings, and government benefits to ensure a secure financial future.
Get started with Purple today and take control of your retirement planning.