Can I pay my house off while drawing SSI?

[microcosmic man]

Hello, I live in KY and I have a question that I need help with. I lost my job of 30 years a few months ago, then I qualified for unemployment (first time ever). In the meantime my wife was declared disabled by the state under SSI, but she can't start receiving payments until my unemployment is exhausted. If I can't find a job soon we will be forced to live on my wife's payment for a while. I was wondering if I would be able to use some of my IRA to pay my house off without my wife losing her SSI? Not having a house payment would help a lot. I'm sure I'll find a good job in the coming months, but until then I don't know what to do. I've never been through anything like this before and I am sooooo nervous. Thank you to anyone that responds.

 

[FlyingRon]

Unless you are over 59 1/2 using the IRA to pay down the home is foolish. Note that a paid off house will figure into SSI eligiblity. So will you having a job.

 

[microcosmic man]

Unless you are over 59 1/2 using the IRA to pay down the home is foolish. Note that a paid off house will figure into SSI eligiblity. So will you having a job.

I just wanted to know if I could pay my house off, using my IRA, while my wife draws SSI, without her losing her SSI benefits. I'm 54, btw. When I find a job we won't need her disability, but until then...

 

[commentator]

No, it's a bad idea. You could take this money out, but it's a very bad idea, because you'd have to report this income. If this is truly SSI, it is strictly income based. If it can't start till you lose your unemployment, then it very likely is SSI, and income based, not Social Security Disability payments, which are not. When you apply to SSI, they take your income very regularly and recertify and decertify quite regularly. so you'd have to report the IRA money if you got it out, else be in trouble for fraud, and it would probably be enough income to alter her eligibility significantly for a long period of time, even though it's going to be much less than it would be if you waited till you were 59 and a half, and even though you spent it immediately.

You're trying to overplan, thinking how you'd make it if you don't find another job and had to try to live on just your wife's SSI which is somewhere around $650 a month. But taking the IRA early will really hurt you as far as how much of it you get. "Substantial penalties for early withdrawal" makes it something you should only consider if you are absolutely about to lose the house, and this hasn't happened yet.

I am very experienced with working with people who lose long term jobs like this. The first thing you tend to do in your thinking and planning is "catastrophize," think what will happen if you never ever find another job and have to lose everything you've got and starve and freeze in the dark. But it is very likely you'll find something else, even if it's not as good as what you have had for so long.

Having a house payment would be okay when you do get another job, just hang on till then as best you can. About the worst things you can do for yourself when you are trying to get on any sort of income based program is pay off your debts. Sadly, then you have no expenses to count against the income you have coming in, and it decreases your likelihood of qualifying for the program.

Just keep looking for another job and work forward from that. Good luck to you.

 

[FlyingRon]

I just wanted to know if I could pay my house off, using my IRA, while my wife draws SSI, without her losing her SSI benefits. I'm 54, btw. When I find a job we won't need her disability, but until then...

I can't tell you if she will lose them, but it would figure into the needs test. Right now the mortgage payment for her shelter works for her. If you pay it off you will certainly make it harder to meet the requirements. You'll also pay 10% penalty for early withdrawal.

 

[microcosmic man]

No, it's a bad idea. You could take this money out, but it's a very bad idea, because you'd have to report this income. If this is truly SSI, it is strictly income based. If it can't start till you lose your unemployment, then it very likely is SSI, and income based, not Social Security Disability payments, which are not. When you apply to SSI, they take your income very regularly and recertify and decertify quite regularly. so you'd have to report the IRA money if you got it out, else be in trouble for fraud, and it would probably be enough income to alter her eligibility significantly for a long period of time, even though it's going to be much less than it would be if you waited till you were 59 and a half, and even though you spent it immediately.

You're trying to overplan, thinking how you'd make it if you don't find another job and had to try to live on just your wife's SSI which is somewhere around $650 a month. But taking the IRA early will really hurt you as far as how much of it you get. "Substantial penalties for early withdrawal" makes it something you should only consider if you are absolutely about to lose the house, and this hasn't happened yet.

I am very experienced with working with people who lose long term jobs like this. The first thing you tend to do in your thinking and planning is "catastrophize," think what will happen if you never ever find another job and have to lose everything you've got and starve and freeze in the dark. But it is very likely you'll find something else, even if it's not as good as what you have had for so long.

Having a house payment would be okay when you do get another job, just hang on till then as best you can. About the worst things you can do for yourself when you are trying to get on any sort of income based program is pay off your debts. Sadly, then you have no expenses to count against the income you have coming in, and it decreases your likelihood of qualifying for the program.

Just keep looking for another job and work forward from that. Good luck to you.

I would like to thank you for your advice, my friend. It was truly helpful and appreciated. I have another question or two to ask if you have the time. Here goes: my wife was approved for SSI medically (needs basis), but was disqualified financially because I am still drawing unemployment, hence too much money coming in. I wonder what would happen if I drew just enough money out of my IRA, before she reapplies for SSI, to pay the house off? Could they still count that against her? She's never drew a dime from anyone yet. Like you, I think it's a bad idea to borrow from my IRA too, but honestly I doubt if I will live another 5-6 years and I just wanted to pay my house off so my wife would never have to worry. But if my house is paid off then they may deduct her SSI payment to reflect the income borrowed from my IRA, as you stated. Well, hopefully I'll have a new job before she reapplies because I won't touch my IRA in that case. Got my fingers crossed. Thanks again.

 

[microcosmic man]

I can't tell you if she will lose them, but it would figure into the needs test. Right now the mortgage payment for her shelter works for her. If you pay it off you will certainly make it harder to meet the requirements. You'll also pay 10% penalty for early withdrawal.

Thanks for your advice. I worry about the future, like if I don't find another job and we have to live on her $733 (wife say this is how much she'll draw) a month for a while. There's no way on earth we could make it on that tiny sum. If I took all of my money out of the IRA, before she reapplies, I wonder if they could count that against her? Sorry for the stupid questions. Yeah, the penalties suck but I don't mind paying them IF it makes everything better.

 

[Onderzoek]

Resources (things of value that you own) are either counted or excluded by SSA in determining SSI benefits. A home that you live in is excluded. An IRA or retirement fund owned by a deemor (spouse) is excluded from deeming to the SSI recipient. One car is excluded. Non-home property is counted. Bank account balances are counted. Household goods are excluded. Cash is counted.

Resources can change from excluded to countable and vice versa. If someone moves out of their home, it is countable. If someone spends their excess resources in a bank account to purchase their only vehicle, the value of the vehicle is excluded the month after it is purchased. If a car is sold, the cash from the sale becomes a resource the following month. This is called conversion of a resource. Usually requires a specialized employee, an SSI claims rep, to make these decisions.

If a deemor (spouse) withdraws their IRA funds to pay down the mortgage on an excluded home, this is conversion of a resource. There would probably be an intermediate conversion of the IRA to cash in the form of a check. If it all happens in the same month, then there would not be any period of ineligibility.

The spouse would have other issues with the IRS. Penalties for early withdrawal, ordinary income taxes if the spouse is not 59 1/2. These penalties and tax could eat up 1/3 to 1/2 of the principal balance. And it removes the potential for growth from excluded interest and dividends, so the decision should not be taken lightly. It probably should be the decision of last resort or hold off until age 59 1/2. Taxes will still be owed, unless it is a Roth IRA.

Talk to someone who does your income taxes. Talk to the holder of IRA (the bank?) to see what the penalties will be. If the change is made, it must be reported to SSA and should be done in the month of or after the final transaction, submitting all document

Also, if she is ineligible for SSI for 12 months due to your income, she will have to reapply and go through the claims process again. If she was approved at the hearing level, it may or may not be enough to be approved at the initial level.

 

[FlyingRon]

It's possible she was getting credit on the calculations for the mortgage. However thinking about it a little more probably not given a non-SSI-receiving spouse.

 

[LdiJ]

I will throw one more thing out there as food for thought:

Once you turn 55, if you are still unemployed then you could start taking periodic payments from your IRA without penalty. (over 55 and separated from service).

 

[FlyingRon]

I will throw one more thing out there as food for thought:

Once you turn 55, if you are still unemployed then you could start taking periodic payments from your IRA without penalty. (over 55 and separated from service).

First, that doesn't apply to IRAs but other qualified retirement plans (401 (k), etc...).

Second, the 55 applies to the day he left the job, not the day he started withdrawing from the plan. It essentially allows someone to retire (or be involuntarily retired) at 55 get get their qualified plan money. By the way, it's only 50 for certain government employee plans.