Having money in the bank while receiving Social Security benefits is allowed, but there are some important factors to consider. In this comprehensive guide, we’ll explain the rules around bank accounts and Social Security, how much you can have saved, which types of accounts count, and strategies to maximize your retirement income.
Can You Have a Bank Account While on Social Security?
Yes, you can have a bank account while receiving Social Security retirement, disability, or survivors benefits. There is no rule prohibiting Social Security beneficiaries from having bank accounts.
However, the amount of countable resources you have in your bank accounts can affect your eligibility for Supplemental Security Income (SSI) benefits. SSI is a needs-based program, so there are strict resource limits.
SSI Resource Limits for Individuals
If you receive SSI, you can have up to $2,000 in your bank accounts. For couples receiving SSI, the limit is $3,000. If your countable resources go over these thresholds at the beginning of any month, your SSI benefits will be suspended.
SSI Rules on Countable Resources
Not all the funds in your bank accounts are necessarily counted towards the SSI resource limits. The Social Security Administration excludes the following:
- Up to $100,000 in funds set aside for burial expenses
- One vehicle per household
- The home you live in
- Certain resources set aside for work expenses if you are disabled
- Life insurance policies with a face value of $1,500 or less
Additionally, not all assets in bank accounts are considered “liquid resources” that count for SSI. For example, funds that can only be accessed through a court order or penalties don’t count.
How Much Money Can You Have in the Bank on Social Security?
For regular Social Security retirement and disability benefits, there are no resource limits – the amount in your bank accounts does not affect eligibility. You can have as much money in the bank or invested as you want.
However, if your income from bank accounts exceeds certain thresholds, up to 85% of your Social Security benefits may become taxable:
| Filing Status | 50% Benefits Taxable | 85% Benefits Taxable |
|---|---|---|
| Individual | $25,000 | $34,000 |
| Married Filing Jointly | $32,000 | $44,000 |
The income thresholds include tax-exempt interest income from municipal bonds and other sources that don’t normally trigger federal income tax. But this income can still cause a portion of your Social Security benefits to become taxable.
Income Sources That May Trigger Social Security Taxes
- Interest earned on savings accounts
- Bond interest
- Dividends from stocks and mutual funds
- Rental income
- Non-Social Security pensions and annuities
- IRA withdrawals
So while there are no fixed limits on your total bank balances or investment accounts, excess interest income can result in owed taxes on your benefits.
Which Types of Accounts Count Towards Resource Limits?
For SSI recipients, all types of bank accounts typically count towards the $2,000 individual and $3,000 couple resource limits. This includes:
- Checking accounts
- Savings accounts
- Certificates of deposit (CDs)
- Money market accounts
- Mutual funds
- Stocks and bonds
Even funds held in revocable trusts available to the beneficiary are counted. Accounts held jointly with another person are generally considered available in their entirety.
The only exceptions are accounts considered inaccessible for reasons other than SSI eligibility. For example, a bank account with a penalty for early withdrawal may not fully count.
Excluded Account Types
These types of accounts don’t count towards SSI limits:
- ABLE accounts – Tax-advantaged savings accounts for disability expenses
- Retirement accounts – Workplace plans like 401(k)s and IRAs
- Passbook accounts – Accounts where you can only make two withdrawals per month
Additionally, up to $100,000 of funds set aside for burial expenses don’t count. Life insurance with a face value of $1,500 or less is also excluded.
Strategies to Maximize Income
If you’re approaching SSI’s resource limits, there are strategies you can use to qualify for benefits while still preserving funds:
Spend Down Excess Assets
If your bank balances are above the threshold, you may spend the excess funds on:
- Home repairs and modifications
- A vehicle
- Medical expenses
- Burial expenses
- Personal goods and services
By spending excess funds before your SSI application, you can become eligible while meeting important needs.
Shift Funds to Excluded Accounts
Move some funds to retirement accounts, ABLE accounts, annuities, or life insurance policies that don’t count towards limits. This can help maximize resources available for disability expenses.
For example, contribute to an ABLE account which has an annual contribution limit of $16,000. Or purchase an annuity that converts countable assets into income that doesn’t reduce SSI.
Use Exemption Strategies
If you have excess countable resources, certain exemptions allow you to qualify for SSI while retaining funds:
- $1,500 Exemption – Unmarried recipients can exempt $1,500 of resources
- Home Exemption – Your primary home doesn’t count, regardless of value
- Vehicle Exemption – One car is excluded
Utilize these exemptions to keep assets above the $2,000 threshold.
Create a Special Needs Trust
Transfer funds into a special needs trust that pays out for expenses while allowing you to qualify for SSI. The trust assets aren’t considered available resources.
A properly structured trust can help you access thousands more in disability benefits over time versus being disqualified by excess resources.
Conclusion
Having money in the bank will not disqualify you from Social Security retirement or disability benefits. However, excess unearned income can result in up to 85% of benefits becoming taxable.
SSI recipients need to keep countable resources under $2,000 for individuals and $3,000 for couples. Strategies like special needs trusts and shifting funds to excluded accounts can help maximize income.
Understanding the program-specific rules allows you to manage resources in retirement while continuing to receive your hard-earned Social Security benefits.