Having a 401(k) and filing for disability
As you might imagine Social Security Disability and Supplemental Security Income (SSI) programs have different rules with regard to 401K accounts. This is simply due to the nature of the disability programs.
Social Security Disability is basically an insurance program paid for by your payroll taxes over your years of work prior to becoming disabled. Since it is not based on need there are no income or resource limits associated with this program. You can have a pension, rental income, 401k accounts, etc with no adverse effect on your potential eligibility for or your Social Security benefits if you are already entitled.
Supplemental Security Income (SSI) is a need based disability program and like other need based disability programs it has income and resource limits. Most 401K accounts are considered a resource that can be converted to cash and therefore it has the potential to render you ineligible for SSI disability. The SSI resource limit is 2000.00 for an individual or 3000.00 for a couple. SSI excludes the home you live in and your highest valued vehicle from this limit. Any other vehicles, pensions, stocks, bonds, 401K, etc count against the limit.
If you are filing for disability your income and assets will be reviewed during your interview to ascertain if you are eligible for SSI. If you are on SSI you should make sure to let Social Security know that you have a 401K, so they can help you determine the best way to handle it.
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