Selling your home during retirement or while receiving Social Security Disability Insurance (SSDI) benefits might feel like a big decision, especially if you’re concerned about how it could impact your benefits. The good news is that selling your home won’t directly affect your eligibility for most Social Security programs, but there are exceptions you need to be aware of. Let’s break this down in simple terms.
Retirement Benefits and Home Sales
For retirees, Social Security benefits are not tied to your income, assets, or even where you live. This means that selling your home and profiting from it won’t make you ineligible for your retirement checks.
However, there’s a small catch: proceeds from a home sale can increase your taxable income, which might result in a higher portion of your Social Security benefits being subject to federal or state income taxes. If you’re planning to sell, it’s wise to consult a tax professional to understand how the sale could affect your overall finances.
No Impact on Earnings Test for Early Claimers
If you start claiming Social Security before reaching your full retirement age, the SSA applies an “earnings test.” This test temporarily reduces your benefits if your income exceeds a certain limit. Fortunately, the profits from a home sale or any other capital gains are excluded from this earnings test. So, even if you sell your house for a considerable profit, it won’t affect your Social Security payments under this rule.
Social Security Disability Insurance (SSDI): No Changes
If you’re receiving SSDI benefits, selling your home won’t affect your eligibility. SSDI is designed for people who are unable to work due to a disability and is based on your earnings history, not your assets.
Laurence Kotlikoff, a professor of economics at Boston University, clarified that there’s no limit on the amount of cash or assets you can have and still qualify for SSDI. Therefore, whether you sell your house or keep it, your benefits remain intact as long as you meet the program’s other eligibility requirements.
Supplemental Security Income (SSI): A Different Story
Unlike SSDI, SSI benefits are needs-based and have strict limits on income and assets. Selling your home could temporarily make you ineligible for SSI benefits if the proceeds push your total assets above $2,000 for individuals or $3,000 for couples.
To remain eligible for SSI:
- Buy a New Home Within 3 Months: If you reinvest the proceeds into purchasing a new primary residence within three months, you can keep your benefits.
- Stay Within Asset Limits: After the purchase, you must have less than $2,000 (or $3,000 for couples) in remaining assets to qualify for ongoing SSI payments.
- Spend Down Excess Funds: If you don’t buy a new home, you’ll have 12 months to spend down the proceeds on approved expenses, such as medical bills, housing costs, or other necessities, to regain SSI eligibility.
Failing to meet these conditions will lead to a suspension of SSI benefits until your assets drop back below the allowable threshold.
Key Takeaways for Retirees and Disabled Individuals
- Retirement Benefits Are Safe: Selling your home won’t disqualify you from receiving Social Security retirement benefits.
- SSDI Benefits Are Also Protected: The sale of your home doesn’t impact SSDI payments as long as you meet other eligibility criteria.
- SSI Requires Caution: For SSI recipients, selling your home requires careful planning to avoid losing benefits.
Planning Ahead
Before selling your home, consider these steps:
- Consult a Financial Advisor: Understand how the proceeds will affect your taxes and benefits.
- Plan for SSI Recipients: If you receive SSI, make a clear plan for reinvesting or spending down your proceeds to stay eligible.
- Understand Tax Implications: A larger taxable income could mean higher taxes on Social Security benefits for retirees.
With proper planning, selling your home can be a stress-free process without jeopardizing your Social Security benefits.
Disclaimer – Our team has carefully fact-checked this article to make sure it’s accurate and free from any misinformation. We’re dedicated to keeping our content honest and reliable for our readers.
Himanshu Sharma writes for The Octant, focusing on recruitment, government schemes, and current affairs. He is dedicated to making complex information accessible to readers.
Himanshu enjoys playing chess, hiking, and trying new recipes, always seeking ways to combine his love for writing with his passion for exploration.