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How does getting a lump sum affect my Social Security benefits?

Q: How does getting a lump sum of money affect my Social Security Benefits?


This topic can be really scary. You know the deal. You’ve busted your butt for weeks and months and maybe YEARs to get your disability benefits. Now, all of sudden, you find yourself in a position where you get a lump sum of money and you don’t know what to do.

The lump sum could be anything. It could be an inheritance. It could be a settlement. It could be a gift. How do you determine if you should tell Social Security about the money and what should you do?

Here are a few things to consider:

1) Remember, Social Security is the federal government and the FEDERAL GOVERNMENT ALWAYS FINDS OUT!!

WHY?! WHY!? WHY are you going to try and run dirty with the federal government, man?? People don’t realize how many things are connected to their social security number. So if you get a ‘windfall’ (like the lottery, or a settlement, or inheritance), there is a PRETTY good likelihood that this information will be reported to the federal government. The information may be reported for tax purposes but if you’re on disability, you better believe that it’s going to filter down to the appropriate agencies.

2) Understand what Social Security disability program you are on.

Most people don’t realize that Social Security has several Disability programs. These different programs require you to be found disabled. However, each program has different requirements when it relates to money and income.

3) There’s a difference between REDUCTION, SUSPENSION and TERMINATION

Depending on the program, your benefits could be reduced because of the amount of money that you receive or the TYPE of money that you receive. Also, for some disability programs, your benefits could be suspended if you receive a lump sum of money. However, this suspension typically remains in effect until you spend all of the money down to a particular dollar amount. Once you have spent the money, you should notify the Social Security Administration so they can reinstate your benefits. Now, keep in mind this point. If your benefits are suspended for more than a year, Social Security will terminate your benefits. In other words, you will have to start over from scratch.

4) Call the Social Security Administration, don’t try to figure it out.

So many times people will receive a lump sum or they know a lump sum is coming so they freak out and are afraid to call Social Security. Under most of the disability plans, you probably won’t have a problem. However, it is much easier to alert Social Security BEFORE than after THEY find out.

5) If you get Workers Compensation or Veterans Benefits, make SURE you understand how they affect your benefits.

Let’s say that while your Social Security disability benefits was coming, you finally SETTLE a big Workers Compensation claim that you had going for a while. MAKE sure you have someone explain to you how your workers compensation benefits may cause an offset or reduction of your benefits. The same is true for Veterans Benefits. Some of the Veterans Benefits programs can count against your Social Security.

6) If you owe SSA money, they will get their money back.

If you get a lump sum of money and, if you know you are, CONTACT Social Security. Don’t wait around. If Social Security determines that you received money from them that you SHOULDN’T have received, they will take it out of your disability check and that is NOT a pretty picture.

7) Be careful if you’re on SSI

The program that is most effected by by WINDFALLS is "SUPPLEMENTAL SECURITY INCOME or SSI". SSI is the program that is NEED BASED. It’s like a welfare program. So if you are getting SSI and then you get a lump sum of money, your benefits may be affected. Your benefits could be reduced or suspended.

8) If you get a lump sum, keep a check on your documents

Keep a record of the items you are spending your lump sum. This way if Social Security makes a big fuss about where the money went, you can show them.

Getting disability benefits is a long and tough process. Keeping those benefits may be tougher if you find yourself in a position to receive a lump sum. However, if you’re smart and pay close attention to detail, you should be able to navigate through the process with little issue.

Categories: Social Security Disability Benefits

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