Saving Money and Benefits Considerations
On this page, we’ll talk about how you can save up money to start your business instead of getting a business loan. If you get public benefits, like Supplemental Security Income (SSI), that have resource limits, we’ll also explain how you can save up more money than the resource limits would usually allow. That means you can save money without having to worry about losing your cash or health benefits.
Saving Money
The most common cash benefits that people with disabilities get are Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI). There is no resources limit for SSDI, so saving up money to start your business will not have a negative impact on your SSDI benefits.
However, if you get SSI benefits, you may worry that if you save up more money than SSI’s resources limit ($2,000; $3,000 if you’re married), you’ll lose your benefits. Fortunately, there are a few good strategies that can let you meet your savings goal for your business without losing your SSI benefits. You can:
- Save money in a federally funded Individual Development Account (IDA)
- Save money in a Plan to Achieve Self-Support (PASS)
- Claim your resources as Property Essential to Self-Support (PESS)
We’ll explain how each of these work. If you don’t get SSI, you should still read about IDA programs, because they can still help you even if you don’t have to worry about the SSI resource limit.
Note: These options are not very well known. Sometimes even Social Security Administration (SSA) employees don’t know about them! If you are getting benefits, you must take the initiative and tell the local SSA office how you wish to use these work incentives to establish your business.
You may be worried that if you start making money with your business, you’ll lose the Arizona Health Care Cost Containment System (AHCCCS) coverage or Medicare you need. However, there are a few reasons you don’t need to worry:
- AHCCCS has no resources limit. That means that no matter how much money you save up to start your business, it will have no impact on your health benefits.
- If your income goes up because your business is profitable, there is an AHCCCS program that will let you pay a small premium and continue getting coverage called AHCCCS Freedom to Work.
- If you get SSI benefits, you automatically get AHCCCS coverage. So if the strategies we explain here help you keep getting SSI while you start your business, you’ll also keep getting your AHCCCS coverage.
- If you get Social Security Disability Insurance (SSDI) and Medicare, your Medicare coverage will continue for many years, even if you lose your SSDI benefits due to the income you make with your business.
Note: Because of health care reform you can now buy private health insurance on HealthCare.gov, even if you have a pre-existing health condition. You will never end up with without access to health insurance because of your small business. However, the programs listed above are often better options for people with disabilities, so it is a good idea to explore all of them.
Individual Development Accounts (IDAs)
An Individual Development Account (IDA) is a type of savings plan for people with low income offered by nonprofit agencies in some Arizona communities. When you open an IDA, a special bank account is set up, and all the money that is deposited into the account does not count towards the $2,000 resource limit ($3,000 for couples), as long as your IDA is federally funded.
For most IDAs, the nonprofit agency will match your contribution. For example, if you put in $25 per month, they may also contribute $25, or perhaps even more. This makes them a fantastic way to save! Not only are the funds protected, you basically get “free money” as you go along.
An additional benefit of an IDA program is that participants get free credit repair and financial education classes that help prepare them for running a business. These mandatory classes are a fantastic additional resource for new entrepreneurs.
There are some limitations with IDAs. Usually the maximum savings are limited to a few thousand dollars, and there is usually a period of time when monthly contributions are required (often 6 – 10 months or longer) before the money will be matched and can be used for your business. Also, the money can only be used to buy a home, pay for higher education, or fund your small business.
To learn more, read the DB101 article on Individual Development Accounts.
|
Your monthly contribution |
The match offered by the IDA program |
The total amount of money you would have 1 year later for purchasing your home |
|---|---|---|
|
$25 per month |
1:1 |
$600 |
|
2:1 |
$900 |
|
|
$50 per month |
1:1 |
$1,200 |
|
2:1 |
$1,800 |
|
|
$100 per month |
1:1 |
$2,400 |
| 2:1 | $3,600 |
- Prosperity Now offers resources and information on IDAs, including a national directory of IDA programs.
- The Assets for Independence Resource Center also has a national directory of IDA programs.
Note: There aren't as many IDA programs as there used to be. Some are still active, but it can take a bit of effort to find one that is accepting applications.
Plans to Achieve Self-Support
If you’re on SSI benefits, another way to save up money for your own business is with a Plan to Achieve Self-Support (PASS). A PASS lets people on SSI benefits put income and resources in a special account that will help them achieve a specified work goal. The money in that account will not be counted as income or resources by SSI. This means that you can save up money to improve your business. An additional benefit is that while any income you get from your business usually would cause your SSI benefits to go down, your SSI benefits won’t go down if you put that income into your PASS!
The purpose of your PASS is to help you get items, services, or skills you need in order to reach your work goal. PASS plans must be in writing and state how long the plan will continue. If your PASS is to help you be self-employed, you have to explain how the PASS will help your business succeed. A good way to do that is by including a copy of your complete business plan with your PASS application. The money you save in your PASS can eventually be used to pay for things like business operating expenses, materials, equipment, supplies, or training.
Your local AZRSA Vocational Rehabilitation (VR) office can help you with all the paperwork to develop and prepare your PASS. To learn more about AZRSA and find a local VR office, click here.
To learn more about PASS, read the DB101 article on Plans to Achieve Self-Support.
Lorena has a disability and gets a $550 SSDI check each month. She also gets a $100 SSI check each month. Between the 2 benefits, she’s just able to cover her expenses.
She talks to a Work Incentive Consultant and learns that if she puts the $550 she gets from SSDI into a PASS, then SSI wouldn’t count that money when they calculate her benefits. That means that when Lorena puts her SSDI money into the PASS, Social Security will give her more SSI benefits!
She decides to put the SSDI money each month into a PASS that will let her save up money to buy a new sewing machine and a computer for the tailoring business she wants to start. Now, she still gets her $550 SSDI check, but saves it all in her PASS. Her SSI check went up to $650, because SSI isn’t counting the SSDI money she saves in the PASS as income. Also, she can save more than the $2,000 SSI resources limit to get her business equipment because money in a PASS doesn’t affect SSI eligibility.
She still has the same amount of money to cover her expenses, but now she’s also saving up money and will be able to get the equipment she needs for her business!
Property Essential to Self-Support (PESS)
Property Essential to Self-Support (PESS) is anything that you own and need to support yourself. The Social Security Administration (SSA) does not count these things as resources when figuring out if you are eligible for SSI benefits. Three types of property can be excluded as PESS:
- All property that you use in a trade or business (for example, your inventory) or personal property you use for work as an employee (for example, tools or equipment)
- Up to $6,000 of the value of nonbusiness property that you use to produce something that helps with your daily living (for example, land that you use to produce vegetables that you eat)
- Up to $6,000 of the value of property if the property gives you a return of at least a 6% per year (for example, property you own and rent to someone else
The first of these is the key for people who are self-employed. If you have your own business, you can have a separate business bank account that is not counted by SSI and won’t impact your SSI benefits eligibility, no matter how large the bank account is. However, only business income and business expenses can be run through this account. If you do not keep your personal money and spending separate from your business account, you could lose your SSI benefits. Be sure to provide your SSA representative with a signed statement that the money in your business account is only used for your business.
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