The Stock Market usually ends up mingling with every monetary aspect of the bank. Social Security Benefits are no exception, as the stock market although not much, definitely affects your social security benefits. Here, we evaluate how this works and what exactly makes the stock market a factor in getting your social security benefits.
How It Works
Social security benefits come from the reserves of the SSTF (Social Security Trust Fund) which are paid out by the federal income taxes and the payroll taxes of the working class people, as well as self-employed individuals. The SSTF is divided into two funds, the first being the Old Age and Survivors Insurance Trust Fund and the second being the Disability Insurance Trust Fund. The stock market affect search of these types of funds in a different way. Here, we explain to you how exactly each aspect of those gets affected by the stock market.
- Retirement Benefits
People earning social security benefits from their retirement have no need to worry about anything. You can invest in anything and everything and your social security benefits won’t be affected one bit. But there are certain limitations to that, as there are with everything.If you take an early retirement and are still earning from your employment,your benefits become taxable or are limited. Also, if your earnings via the stock market exceeds a certain amount, your benefits become taxable in the government’s eye.
- Disability Benefits
This is where things become a little bit complicated. There are two scenarios in receiving social security benefits for the disabled people. The benefits can be availed only by the disabled people who are earning less than the amount of “substantial gainful activity”,which came to $1,180 in 2018. Anyone earning more than this is instantly disqualified for getting the benefits.
But for people earning less than this amount, you can invest as much as you want in the stock market and it won’t affect your benefits, as the income you earn from investments is considered to be “unearned” and exempts your benefits from any taxes or cuts. But, yet again, if you’re earning more than a certain amount, your benefits may become taxable, but only the benefits, as the income from the stock market is still considered “unearned”.
As you can see, the effect of the stock market is very limited on the social security benefits. But that may not be the case soon, as there is a huge shift in the stance of the Social Security Trust Fund, which is soon supposed to go bankrupt. This may spike certain big-time changes in its policies that will definitely put on some or many more restrictions on you availing the benefits. This is majorly due to the baby boomer generation, availing the retirement benefits early on, and draining the benefits funds. The bottom line is, you should not be completely dependent on the government’s nest egg and set up your own personal accounts for after your retirement, to be safe from all the mayhem that may come in the future.