Savings Ideas for Someone on Disability

[smallone]

I have a neighbor who was recently asking for advice on the best strategy for her to save money. She receives social security and doesn't work yet she is smart enough to save for the future and any rainy days. She already has an IRA which she started recently but knowing she'll be penalized for early withdrawal, she is trying to find a way to save in case she does need emergency money. She can only save about $50 month and I told her that saving what you can, no matter how small the amount, is good. She doesn't want to put it in savings because the interest rate is low and would consider investing but neither of us are investment savvy much. She is like my sister and any advice is helpful. She just needs somewhere safe to save where she can access the money in an emergency without penalty. Any ideas? I'm in a similar situation. I want to save but don't have a large amount to save each month. All suggestions welcomed.

[Michelle]

Bank savings accounts and short-term CDs are good options for people who need to be able to access their funds quickly, easily and without penalties.

[72Tiger]

CD's usually have penalties for early withdrawals. A few allow a one time early withdrawal without penalty, but I don't know how quick you can get the money.

On line savings accounts can offer between 3 and 4% right now, and it only takes a few days to get to your money. They do require an internet connection, and for you to link their online account to an account you have in a bricks and mortar bank.

If you can only come up with $50 a month or so, an online account is probably your best option. Buying stocks or mutual funds requires that you pay a small fee. Even if it is only $5 per transaction, that is %10 lost right away. Also, because of their volatility, they are not the best choice for an emergency fund - you don't want to have to sell them when the market is down in order to cover your emergency.

[Julie Rains]

Here are a few ways to invest $50 per month:
1) Dividend Reinvestment Plans (with the Duke Energy program, for example, there is a $250 initial investment minimum and then you can invest as little as $50 per month; according to the prospectus, there are no fees to invest or maintain the account, but a small fee to sell shares)
2) Sharebuilder: there are no fees if you invest in Class O shares of ING mutual funds -- that's limiting but is a way to get started (I wrote about Sharebuilder earlier as well but the program has changed since then, with more offerings following the acquisition by ING)
3) Save until you can pay the minimum amount of many investment minimums that seem to be either $2500 or a $100 monthly minimum

If you put the money in a Roth, you can enjoy tax-free capital gains but still have access to the money invested (not the gains) if you need it in an emergency.

[TomaszStasiuk]

If you are on Social Security disability, be aware that there are two kinds of Social Security disability (small "d"): Disability Insurance Benefits (DIB), and Supplemental Security Income (SSI). If you are receiving SSI, Social Security may reduce or even stop your benefits (potentially including stopping your Medicaid), if you have too much in savings.

It is fairly rare for someone getting SSI to save enough for that to be a problem. Normally, the asset caps occur because of a settlement, gift or inheritance, but it a good idea to keep this in mind.

I have an article which will talk about this going up on my site on October 1, 2008.

[smallone]

My neighbor doesn't save a lot and my reason for needing to save is due to my daughters who will soon be going to college. I am getting regular social security disability benefits. In your article please give info and tips for those in my situation not only looking out for their future but for those of their children. I look forward to your article in October.

[SouthShoreGirl]

Originally Posted by TomaszStasiuk

If you are on Social Security disability, be aware that there are two kinds of Social Security disability (small "d"): Disability Insurance Benefits (DIB), and Supplemental Security Income (SSI). If you are receiving SSI, Social Security may reduce or even stop your benefits (potentially including stopping your Medicaid), if you have too much in savings.

It is fairly rare for someone getting SSI to save enough for that to be a problem. Normally, the asset caps occur because of a settlement, gift or inheritance, but it a good idea to keep this in mind.

I have an article which will talk about this going up on my site on October 1, 2008.

Good points, thanks for bringing this up. I am a social worker and work with people who are disabled so this is very important. There are also ways to protect your assets and keep your Medicaid if say, you own your home, or have a lot of $$$ coming to you from a settlement (I work with people with brain injury so this is very common). A lot of people set up what is called a special needs or a pooled trust in cases like that. Sorry for the threadjack!!

[smallone]

do you have any information onthe special needs or pooled trust for cases like mine? While my husband is military and can save for us in his name, due to a past relationship I have learned that a woman needs to have money in her own account as well. My main savings goal is for my daughters. If you can reference a website or something, I would appreciate it greatly.

[SouthShoreGirl]

Here is the resource in NYS that I usually pass onto my clients. There are other ones though. I am sure if you do a google search on the subject for your area, you will come across something.

http://www.nysarc.org/family/nysarc-...t-services.asp

[TomaszStasiuk]

Smallone, as SouthShoreGirl mentions, if a person is on SSI (Supplemental Security Income) and "comes into money," a "special needs trust" may preserve eligibility for SSI.

Special Needs trusts are special kind of trust, and usually require a special attorney. Lots of attorneys do trust work, very few are qualified to do special needs trusts. This is a jedi mind trick of sorts, "yes, I got money, but this not the money you are looking for. Let me keep getting my benefits."

It is legal and there is nothing fishy about it. But it has to be done right, or the trust may fail. If that happens, the SSI benefits may stop, Medicaid may be discontinued, and the person may have to repay the government months or years of benefits they were paid. In other words, bad things can happen if the special needs trust is not properly set up.

There are usually a handful lawyers in each state who regularly do special needs trusts. You do not want a dabbler! I cannot put this strongly enough! I know some names in Colorado, but I might just google the state name and "special needs trust."

Smallone, I note that your comment makes no mention of SSI. Is the neighbor just getting Social Security retirement benefits?

Special needs trusts are a tool for a very specific set of circumstances. It greatly limits what the money can be used for. Which is why SSA allows a person to keep getting SSI despite the windfall. But those limits may make it a very poor choice if a person unless a person might loose eligibility for SSI (generally speaking).

It sounds like you just want to sock away some money for a rainy day. If you want to keep this money hidden from your spouse in case of a divorce, thaaaaaat's a whole 'nuther kettle of fish which can get you into hot water (which would make fish stew, I suppose).

TINLA (this is not legal advice). Go in peace and sue no more.