Being your own boss on disability: mastering your destiny

As I’ve mentioned on previous posts, you can work while on SSI or SSDI. There are programs, like Ticket to Work and Vocational Rehab programs that can help with the process.

However, the reality is that while they can give you information about working, they often are only prepared to help you with calculations related to working for an employer and have a much harder time articulating how self-employment works when on these programs.

They know and understand the calculations needed in terms of earning limits and the size of exemptions if you are working for an employer, but self-employment is a bit more tricky, and nebulous, so too many advisors simply don’t know what to say or how to suggest managing the process.

While I am not an expert, I have explored this system a bit, and know what the magic numbers are.

I’ve also started two businesses of my own while on SSDI, and neither one of them has led to the loss of my benefits(I did mess up my benefits at one point, but only because I failed to think ahead and took on both self-employment and work for an employer at the same time at effectively a full-time basis.)

I want to help you understand what the process means and how it works. It is very different between SSDI and SSI, so I want you to be aware and look out for different traps depending on which program you’re on.

Working can be therapeutic if you’re well enough to manage it, and by being your own boss and working at a pace you can handle, you may be able to safely supplement your income and feel better about yourself and your life.

Supplemental Security Income and self-employment

SSI is designed to help people with minimal work history and few assets to survive. The program involves SNAP benefits, Medicaid, and a monthly stipend(SSI payments). Each of these parts are impacted by the amount of income you have.

Income is very broadly defined here, and can include things like others providing you with living space or food, unearned income like the direct SSI payments, and any income you earn. The basic benefit of $750/month(national) is only available if you are financially responsible for your food(buying groceries) and housing(paying rent).

Once you have SSI benefits, you can work and still get benefits, but your financial benefits(and SNAP eligibility) will be decreased based upon your earned income.

As you earn money, the other benefits you recieve are reduced. Your first $20 of unearned income and $65 of earned income aren’t counted, but everything beyond that is.

How this works with self-employment is focused on this concept of Net Earned Self-Employment(NESE) and the entire calculation process is nicely laid out in the video below.

You will need to calculate your own break-even point, which is the dollar income where you would no longer receive payment from SSI because your earned income eclipses it. You also can get confirmation of your break-even calculation from social security or associated programs.

For roughly every dollar earned, you lose about 50 cents of coverage. Each month, you’d report your net income, and that would determine the amount of your monthly check.

If your net earned income stays under your break-even point, you can maintain your SSI and Medicaid for the rest of your life without risk. Your SNAP benefits may change as they are calculated based upon your total income (SSI payments plus your net business income).

While planning it all may feel complicated, there are definitely values that you can request or calculate, and you can maintain your benefits if you manage your income and expenses.

Medicaid coverage under SSI and afterwards

Once your net monthly income is over your breakeven point, you may need to request additional supports from social security in the form of Continued eligibility for Medicaid, 1619(B).

There is, of course, a maximum income for that, too. The eligibility numbers up to 2019 are listed on the previously mentioned site, to give you the gist. The most up-to-date information, and the calculation used to reach the income threshold are updated annually, and a little complicated. It’s always going to be higher than your break-even point, and sometimes there’s a little wiggle-room around that number if your medical care costs are especially high.

Basically, though, if you’re looking to play things safe(something you generally want to do with these programs), your best bet is to keep your net earned income under your break-even point until you feel comfortable applying to expand your Medicaid coverage, and to stay under the threshold for your Medicaid coverage until or unless you are ready to purchase your own insurance coverage.

Social Security Disability Insurance and self-employment

If you are on SSDI, the primary consideration is Substantial Gainful Activity(SGA). SGA is recalculated every year, and very slowly increases. For 2020, SGA for most disabled people is $1260/month. The 2020 SGA for blind people is $2110(if you are legally blind, many of the financial rules are slightly different).

SGA is your magic number, your tipping point. As long as your net monthly income is under SGA, you continue to recieve 100% of your benefits. The moment your net income exceeds SGA, you run the risk of being cut off from the financial benefits.

There is another number to be aware of, though – your Trial Work Level(TWL). This is where the whole ticket-to-work program comes in. This is especially important for self-employment.

In an ideal world, you want to keep your net income under your TWL for as long as possible – and if you do go over, you want to just be over for a single month. For 2020, the Trial Work Level is $910.

Here’s the deal: your disability benefits allow you a trial work period of 9 months during which you can earn any amount of money without endangering your benefits. These do not need to be consecutive. Once those nine months are used, though, you move into your next stage: the Extended period of Eligibility. It isn’t easy to get another trial work period.

If your income is under the Trial Work Level, it’s not considered part of the trial work period. You can earn that amount forever with no risk to your benefits whatsoever.

To grow your business, you need to take risks, of course – and I think you’d prefer a full 9 months to test your wings before you stop collecting benefits to give yourself extra security.

So, by keeping your net income under $910/month, you are saving your trial work period until you feel ready to stop collecting your SSDI benefits.

If you run a service-based business, or working primarily from home, you don’t need to worry as much about the number of hours you are putting in(beyond the obvious necessity of prioritizing your health and not overdoing it), but if you have a storefront or other business with defined hours and/or have supervisory responsibilities, be aware that the social security administration does have certain expectations around limits to your ability to participate in your own business.

While the passage referenced above has some severe governmental legalese without many useful numbers, what it boils down to is this: if you own your own business, you need to keep very careful track of your hours and activities.

You don’t want to have been providing ‘management services’ for more than 45 hours a month. You also want to keep track of how others helped you, as that assistance can be subtracted in some cases.

If you are the sole owner of your business, then the net profits of the business are considered 100% yours, and count towards those SGA and TWL counts. If you have business partners, then the value is divided among you based upon percentage ownership.

It’s also considered SGA if you are putting in the equivalent amount of work as somebody who runs a similar business full-time. Running your own business while maintaining your SSDI gets more complicated the bigger or more intricate your business is.

This doesn’t mean you can’t make it happen, just that it can become complicated and you likely need to keep better-than-average records of your work.

SGA is basically your income limit if you want to continue to get your full SSDI benefit. Once your trial work period is completed, your SSDI payments stop if your net income goes over SGA.

You can get them restarted if they go back under, so you do still have some protections, but if you really want to get completely off of SSDI and run a successful business, you want to build things up until you know that you’ll have a reliable income that at least makes up for the benefits you’re losing.

My recommendation is to use your Trial Work Period specifically for that purpose.

Medicare and Self-employment

Your Medicare coverage will continue for at least 93 months after you stop recieving benefits as long as you remain disabled. The 9 months of your trial work period are considered part of that 93 months, but that still means you will have close to 8 years of Medicare coverage after you stop receiving the financial benefits.

The clock will be ticking, but you’ll have a reasonable amount of time to determine your next step on the insurance front – which may include the option to purchase more Medicare coverage after that time period ends.

Knowing that can help make that process easier, and help you be able to plan ahead.

I keep mentioning net income for a reason

One of the most important distinctions between being an employee and self-employed when it comes to benefits is how your income is counted.

As an employee, social security cares about your gross income, not net. Your net income is what’s on the check. Your gross income is what your employer said they would pay you when you were hired – the amount before taxes and such are removed.

When you are self-employed, though, they don’t care much about your gross income, but instead base all calculations off of your net income.

Gross income when you’re self-employed is the entire amount of money your business earns. For example, if I offer a $200 course and somebody buys it, my gross income is $200.

That differs(sometimes tremendously) from my net income.

Net income is the amount of money that you have after all business expenses are paid.

There are costs involved, in my case, in running and maintaining the website, in utilizing the program that processes the payments, and in any advertising or social media sharing programs I might purchase.

Also, if I invest in coaching for training for myself, that’s also a reasonable business expense. With my previous consulting business, I was focused on a particular technology(Geographic Information Systems) so I put a lot of my business income into going to conferences to network and have a deeper understanding of my field. All the costs associated with that were business expenses, reducing my net income.

On top of that, if you have conditions that require adaptive supports, those can often be subtracted in the form of IRWE expenses.

There are a few ways to reduce your net income in ways that are helpful and productive to both you and your business – and part of your responsibility to make the most of this situation is to make sure that you do so in a way that keeps your net income under your magic numbers.

You are best served by spending any ‘extra’ money on your own professional development or on employees that reduce your workload(or increase your business’s efficiency).

Notifying Social Security of your income monthly

You are expected, especially on SSI, to notify social security of your income every month. This is a relatively simple process if you have an employer, but when you’re self-employed it’s a bit more complicated. As I was mentioning above, you need to report your net income, not gross, and there are costs associated with miscalculating your reported income.

With SSI benefits, your monthly check is calculated based on the income information you share, and eventually double-checked against your tax information.

If you fail to report the information, then they’ll make assumptions based upon the available information, which can often be interpreted to your detriment.

After your taxes are filed, SSI goes over that information and determines if the information you shared lines up with what your taxes show.

Once they complete that assessment, your payments will be adjusted to reflect that – so if they determine that they underpaid you(a rare occurrence), you’ll get a larger check and if they determine that they overpaid you(a much more common calculation), your next check will be decreased accordingly.

With SSDI, you should be reporting every month for your own protection, but they’ll also make calculations based upon your taxes and other records.

The problem is that they generally take your net income and average it over 12 months, which means that if you averaged out as over your trial work level, not only is your trial work period gone, but you also, theoretically, have been overpaid the rest of the time, so you owe a minimum of 3 months back pay as well.

That’s the scary thought.

However, if you notify social security as soon as you start approaching any of the income limits, your worst-case scenario shifts to having a month here or there in which you earned ‘too much’, and are counted as a trial work month.

You want to be in the habit of reporting this information, and of keeping good records of your business’s finances, so you can give them a ‘profit and loss’ statement whenever they may ask for it in order to help prove your gross and net income.

It’s to your benefit to report your income each month, so that you control the narrative of how much your company is making and spending.

Planning ahead

Planning ahead isn’t always easy and you never know for sure what potential clients/customers may do – but by understanding how these calculations are made, you can control your income and expenses so that you can determine when or if your income hits or passes these limits.

For example, my business is currently a sole proprietership, which has minimal expenses and minimal protections – my business is effectively indistinguishable from me as a person.

That works for now, since I’m only working with a small number of people and am not widely known.

However, once my income becomes more regular and reliable, I’m going to make the investment in my business of registering it as a Limited Liability Company, which makes it an independent entity from me and provides certain legal protections.

It can cost up to a few hundred dollars to do the associated paperwork, so that’s on my ‘do once there’s a steady income stream’ list.

For many businesses, people have a severe pressure to make money as quickly as possible after they start. This can sabatoge some of their efforts or increase the stress of running the business.

For those of us on SSI or SSDI, this isn’t the case.

Investing in ourselves and our business is the best thing we can do – and the way these benefit programs are set up encourages us to do that.

Instead of trying to make money right away, focus on building a really good foundation for your business, and on bringing in the clients/customers you’d really want.

Keep your net income low(under the magic numbers) so that you can maintain your disability benefits while you get a solid foundation – and reinvest that ‘extra’ income right back into yourself and your business.

Use that money to hire help(ideally other disabled folks), to build your skills, or to increase the efficiency of your processes(so you can work less and earn more).

You can build yourself and your business a really solid foundation that way, so that you can feel even more confident that whenever you do get off of benefits, it’s likely to be a permanent solution, not a temporary one.

Shameless plug

While I have laid out the general rules and expectations here, I know that because this can be a huge and overwhelming decision it often feels good to have extra support.

Knowing that, I have created a small coaching package designed specifically with you, the disabled entrepreneur, in mind.

Navigating the Social Welfare System is a four-session goal-oriented support program. If you are feeling overwhelmed or anxious about these options, I will happily help you through it. We can go over the details of your particular business concept or plan, and what support program(s) you’re on.

We can calculate your income limitations, products, and/or management plan, and I can help you with resolving your particular challenges when it comes to starting your business while recieving benefits.

I understand the challenges, having started two businesses myself, and also have a nuanced understanding of the psychological challenges that come with these decisions.

Jumping into the unknown always has some fear associated with it – I want to help you get through that fear to find your best possible solution.

Conclusion: Self-employment is absolutely an option!

Being self-employed while on SSI or SSDI is absolutely an option, but a lot of assistance programs are less certain about how to handle them.

If you collect SSI benefits, working will decrease the size of your monthly check, but your total income will always go up. You will want to keep careful track of your monthly gross and net income(gross – expenses = net) and report it regularly. Until you hit your personal break-even point, there’s nothing to worry about beyond that reporting process.

If you pass the break-even point but remain disabled, you can continue to receive Medicaid benefits as long as you apply for 1619B. There is an income threshold that you need to stay below to remain eligible for Medicaid. If you pass your state’s threshold, you cannot maintain Medicaid benefits.

If you collect SSDI benefits, your monthly income is unaffected by your work as long as your net income stays under SGA($1260).

However, every month that your income is over the Trial Work Level($910) it’s considered a trial work month, and you only have 9 of those.

You can earn any amount of money in the Trial Work Month without losing benefits, so it’s best to ‘save’ those for when/if you want to completely come off of benefits, as that gives you that time as a safety net to prove to yourself that you can earn as much or more than you would on SSDI.

Medicare coverage will also continue for at least 93 months after you stop receiving the financial benefits as long as you remain medically disabled. Beyond that, there is sometimes an option to purchase extended coverage.

For both benefit programs, all calculations are based on your net, not gross, income, which means that you can control that amount by strategically investing in your own training, healthcare, and in your business.

Unlike many businesses, you want to keep your net income relatively low by investing more in your business – take advantage of this and use it to strengthen your foundation.

You always should plan ahead, especially when running a business – but part of that planning when you’re on disability is how to make sure that you are able to protect yourself by maintaining those benefits for as long as they help you.

You deserve to have a healthy work/life balance, and given all the work it likely took to get on benefits, you should be in control of when/if you get off of them!