Most financial planners advise individuals and couples to create a Social Security filing strategy that maximizes benefits payable but also takes situational specifics into account. For example, a person, who develops a condition such that s/he needs to retire at age 62, may be best served by filing early for her/his Social Security retirement benefit. Whereas a person who continues to work would be better served by not filing until her/his full retirement age to avoid having payments reduced due to the Retirement Earnings Test. Things are more complicated with a couple, because one of the two may be eligible for auxiliary benefits, based on the other’s work record, and both individual’s health and other characteristics must be considered.
When a parent or parent couple has a child with a disability, the complexity of filing for Social Security benefits moves to an even higher level because the minor child or adult child, whose disability started before age 22, may also be entitled to auxiliary benefits, based on the parent’s or parents’ Social Security work history. Now, we are looking to maximize the benefits to an additional person. Moreover, the size and type of the Social Security benefits that an adult child with a disability receives can affect her/his eligibility for Medicaid, Medicaid waivers and Medicare.
I always recommend that a youth with disability apply for Social Security disability benefits as soon as s/he turns 18, if s/he has not had benefits under the children’s criteria. If one or both of the youth’s parents are at retirement age and are considering applying for Social Security retirement benefits, I generally counsel the parents to wait until their child’s application has been approved. This is because an 18-year-old youth, who applies for Social Security disability benefits and meets the Administration’s definition of “having a disability”, is then potentially eligible for three different benefits. If they have worked, they may have sufficient Social Security credits for Social Security Disability Insurance (SSDI), based on their own work record. If at least one of the youth’s parents has filed for retirement benefits, then the youth may be eligible for a “Childhood Disability Benefit (CDB)” also known as a “Disabled Adult Child (DAC)” benefit. If neither of those situations apply, then the youth will be eligible for Supplemental Security Income (SSI). If the first and the second situations both apply, then youth’s SSDI benefit may be small enough that s/he can still receive some SSI. In the third scenario, though, the youth will probably receive a CDB/DAC benefit that is large enough that they will be ineligible for SSI altogether.
On the surface, SSI seems to be the least desirable benefit. For one thing, the maximum SSI payable is only $943/month (for 2024, with a small increase each subsequent year). If the youth lives with others, such as parents, and does not pay anything, then the maximum payable is reduced to $628 due to the presumed in-kind income, attributable to food and lodging. On top of that, a person’s SSI payable is reduced whenever they have unearned or earned income from any other sources. Both SSDI and CDB/DAC, which functions like SSDI often pay more per month than SSI, are not reduced at all because of unearned income from other sources and are not reduced for earned income below a certain threshold. SSI does have one powerful initial advantage, however. Persons who qualify for SSI and Medicaid concurrently for even one month fall into the categories of “Special Groups of Former SSI Recipients”, as designated by the Social Security regulations. So long as a person continues to meet the medical/functional and asset limitations associated with SSI, they remain categorically eligible for SSI and therefore categorically eligible for Medicaid, even if their earned income rises due to working or their unearned income rises due to transitioning to an SSDI or CDB/DAC benefit.
Conversely, people who skip the SSI stage and go directly to receiving SSDI or CDB/DAC benefits only may find that their income from these benefits (combined with any income from employment) is high enough that it precludes them from most of their state’s Medicaid eligibility categories. This. in turn, will preclude them from any adult services that are funded (and most are) by Medicaid Waivers. If some or all of their income derives from employment, they may be able to qualify for their state’s Medicaid buy-in for workers with disabilities; however, they will have to pay a premium. Most states also permit those whose income is “too high” for Medicaid eligibility to “spend down” the excess income on an ongoing basis, while a few states permit the excess income to be directed to a Miller trust, which removes it from consideration. These options, though, may leave the person with insufficient income remaining to cover living expenses.
There are a number of factors to consider in determining when to file for Social Security Retirement benefits. If you are the parent of an adult child with a disability, your adult child and your family may be best served if the adult child first applies for benefits and receives SSI and Medicaid for at least a month before you file your own claim. In any case, it is a good idea to work with a professional and understand all the implications of your family’s Social Security filing strategy.
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