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What Happens When You Win the Lottery While on SSI?

A common concern among those who play the lottery is what will happen to their SSI benefits if they win the jackpot. Will they still be able to collect their winnings, and will they have to give up their SSI benefits as a result of winning?

If you are on SSI and win the lottery, you must report your winnings to the SSA and lose some of your SSI benefits. This will depend on how much you won and may only be temporary. However, if you are only receiving SSDI or Social Security retirement benefits, you will not be affected.

Let’s go into further detail to get a better understanding of what will happen if you win the lottery while on SSI.

Distinguishing Between Social Security Programs

A lot of people mistakenly think that SSI and Social Security retirement benefits are the same things. Other people think that SSI and SSDI benefits are the same things. Although the Social Security Administration runs all of these programs, they are entirely different programs. This is important to understand because lottery winnings will affect retirement benefits and SSI benefits in different ways.

Doing a simple Google search for how lottery winnings will affect your SSI benefits can give you an incomplete answer. Many of the articles you will find are actually addressing Social Security retirement benefits and not SSI benefits. This might lead you to believe that your SSI benefits won’t be affected if you win the lottery or you don’t have to report your lottery winnings to the Social Security Administration, both of which are not true.

In this section, we will go through the SSI, SSDI, and retirement programs. Once you understand what kind of benefits you are getting, you will understand how winning the lottery will affect your benefits.

What Is SSI?

SSI stands for Supplemental Security Income. It is a needs-based program, and it is paid out from funds generated by general tax revenue. This means that unlike retirement benefits, which are paid out from money you put into the program yourself, SSI is not dependent on your own, previous earnings. Instead, it is dependent entirely on whether you need supplemental income to live.

Since it is based on your needs, your current income is taken into account. This is used to determine whether you need supplemental income or whether your current income is sufficient for your needs. This means that if you win the lottery and you no longer need supplemental income, your SSI benefits may be affected (more later).

SSI is given to people who have limited resources and income and who qualify. You can qualify if you are over 65 years of age, if you are disabled, or if you are blind. If you are disabled or blind, you can qualify for SSI benefits even if you are not over 65 years of age (even children can qualify for SSI benefits).

You can qualify for both retirement benefits and SSI benefits at the same time. However, if you are receiving SSI benefits, whether you are also receiving retirement benefits or not, you must report all changes to your income or living situation. This means that if you win the lottery, you will have to report that income.

What Are Social Security Retirement Benefits?

Social Security retirement benefits are usually referred to when the term “Social Security” is used. If you searched Google for information about what will happen to your SSI benefits when you win the lottery, be careful not to get your information from articles that only talk about “Social Security,” as they are usually talking about retirement benefits and not SSI benefits.

Social Security retirement benefits are not based on need but are based on your previous earnings. There is no income or resource limit, but you must have enough work credits from previous work to qualify. It is paid for not by general taxes but by Social Security taxes. These taxes are usually taken off from your wages by your employer. If you are self-employed, however, these taxes are paid for yourself.

Social Security retirement benefits are based on your average lifetime earnings. However — and this is important — other income usually does not affect your retirement benefits. This is important to remember, as we’ll be going back to this later when discussing how winning the lottery might affect your Social Security retirement benefits.

The only exception to this is the wages that you get from actual work. Such wages sometimes affect your Social Security benefits. However, lottery winnings do not fall into this category.

What Is SSDI?

SSDI is a disability insurance benefit that is dependent on you having previously worked. However, unlike standard Social Security retirement benefits, SSDI benefits are only available to people under 65.

What this means is that although you can get Social Security retirement benefits and SSI benefits at the same time, you can not be getting Social Security retirement benefits and SSDI benefits at the same time. You can start receiving SSDI benefits five months after you become disabled, and you can continue to receive those benefits as long as you remain disabled.

However, once you reach the age of retirement, you will no longer be eligible for SSDI benefits, and your SSDI benefits will simply turn into standard retirement benefits.

The main difference between SSDI and SSI is that SSI is based on disability, age, and need, while SSDI is based on disability and previous earnings. The average SSDI benefit rate is actually higher than the standard federal SSI rate, but that is because SSDI benefits are dependent on previous earnings. The federal SSI benefit rate is $783, but your state may add a small supplement to that.

Do You Have to Report Lottery Winnings on SSI?

Now that we have understood what each program is, let’s move on to what will happen if you are on SSI and suddenly win the lottery. This is a question that concerns many individuals who enjoy playing the lottery for fun but are also dependent on their SSI earnings.

If you are on SSI and suddenly win the lottery, you do have to report those winnings. Remember that you must report all income while on SSI and that even includes gifts or financial assistance that is provided by family members who are living with you. According to the Social Security Administration, lottery winnings also fall into the category of income that must be reported by SSI recipients.

What Happens When Your Spouse Wins the Lottery?

What if you were not the one who won the lottery, but your spouse was? You may think that you don’t have to report those winnings since you did not win them, but according to the Social Security Administration, that is not the case. In fact, not only do you have to report lottery prizes that are won by your spouse, but you must also report lottery prizes that are won by your child.

These winnings can be reported either by you or a representative payee on your behalf.

Do Gambling Winnings Have to Be Reported?

Another common question is if SSI recipients have to report gambling winnings. The answer to this is yes, gambling prizes and winnings are treated the same as lottery winnings and must be reported. Like lottery winnings, you or a representative payee on your behalf must report gambling winnings that are won either by you, your spouse, or your child.

Do Small Winnings Have to Be Reported?

What if you only won $300? You might be worried about reporting that prize, wondering if, by doing so, you will forfeit all of your SSI benefits. Don’t worry — that won’t happen, as your SSI benefits are dependent on your needs. However, all winnings must be reported, regardless of whether you won $10,000 or only $100.

Although some money may be deducted from your SSI benefits, you will not lose all of your benefits.

The same goes for gambling winnings — it doesn’t matter how much money you won by gambling, as all winnings must be recorded.

How Soon Should You Report Your Winnings?

It is important to report your winnings as soon as possible. You should be reporting it the same month as you won the lottery. Do not delay.

Will You Lose Your Lottery Winnings if You Are on SSI?

No, you will not lose your lottery winnings if you are on SSI. In fact, as we will see in the next section, it is the other way around. If you are on SSI and win the lottery, you will be able to keep your lottery winnings. However, you may lose some of your SSI benefits.

Will You Lose Your SSI Benefits?

Yes, you may lose all or some of your SSI benefits if you win the lottery. However, remember that SSI benefits are dependent on your needs. If you only win a small amount, you are not likely to lose all of your benefits.

How Much Will You Lose?

How much of your SSI benefits you will lose will depend on how much you won.

Let’s go back to the federal standard SSI benefit, which, as we mentioned earlier, is $783. Let’s say you win $700 in a local lottery. You may only lose your SSI benefits for one month, and after that, you may be able to go back and start collecting SSI benefits again.

Let’s envision another scenario, in which you only won a few hundred dollars. In that case, your SSI benefits may be reduced for a month, but you may not lose all of it.

Let’s envision another scenario, in which you won a lottery that pays you out $7000. In that case, you may lose your SSI benefits for around ten months.

The point here is that the amount of SSI benefits that you will lose will be directly proportional to the amount that you won either by playing the lottery or by gambling. This means that in the long run, you won’t necessarily be losing any of your income.

Will You Have to File a New SSI Claim?

What if you won a large lottery prize? What happens after you use up the money? Will you be able to go back and start collecting SSI benefits again? What kind of process would that involve, and would you have to file a new claim?

If you become ineligible for SSI benefits for less than a year, you can simply go back to collecting your SSI benefits once you are eligible again. An example of that might be if you won $5,000. However, if you become ineligible for SSI benefits for over a year, you would generally have to file a new claim once you become eligible again.

Remember that to qualify for SSI benefits, you have to have assets worth no more than $2,000. If you are a couple, your combined assets must not be worth over $3,000. This can be affected by you winning the lottery.

Is It Worth Playing the Lottery on SSI?

This automatically raises the question of whether it is even worth playing the lottery if you are on SSI benefits. Yes, you won’t be losing a lot of money if you win, but you also won’t necessarily be gaining a lot of money from the lottery if you stand to lose some or all of your SSI benefits by winning. Is it really worth spending money on playing the lottery if you have nothing to gain?

However, it is important to differentiate between different kinds of lotteries. If you stand to win $700, winning the lottery probably won’t make a big difference to you, because after winning that amount, you will likely lose SSI benefits similar to that amount. However, what if you play in a lottery where you stand to win tens of thousands or even hundreds of thousands of dollars?

In that case, you probably won’t care if you lose your SSI benefits because your winnings from the lottery will make you financially secure. Therefore, if you are on SSI benefits, the best kinds of lotteries to play are those that give you the chance to win large prizes. This way, you can have fun and have something to gain at the same time.

The same goes for gambling. Although gambling winnings at slot machines are generally lower than large-prize lottery winnings, you can still earn a decent sum of money.

Will Lottery Winnings Affect Retirement Benefits?

Now that we know that lottery winnings will affect SSI benefits (but not the other way around), let’s see if they will affect your standard Social Security retirement benefits. This is important because many SSI recipients are, in fact, also receiving Social Security retirement benefits.

The answer is that if you are receiving Social Security retirement benefits, your benefits will not be impacted if you win the lottery. This is great news! If you are on both SSI and Social Security retirement, then although you may lose your SSI benefits, you will still be able to collect your regular Social Security benefits.

However, there are some caveats to this. Although your regular Social Security benefits will not be affected, you may have to pay higher Medicaid premiums if you win the lottery. Your lottery winnings can also affect whether you have to pay taxes on your Social Security retirement benefits or not.

If half of your Social Security benefits and other income you received (including lottery winnings), exceeds $34,000 for single filers, 85% of your income will be taxable. If you are married, then that number is $44,000. However, if half of your Social Security benefits plus any other income you receive is less than $25,000, then none of your income is taxable. You can keep all of your benefits and lottery winnings, tax-free.

It is important to remember that lottery winnings are not considered earned income concerning Social Security retirement benefits. This means that although you will have to pay federal taxes on your lottery winnings, they do not affect how much your Social Security benefits will be in the future, as those benefits are determined based solely on your past earned income.

Of course, you will be able to collect lottery winnings even if you are on Social Security retirement benefits. Being on Social Security will not affect your ability to gamble or play the lottery.

Bottom Line: If you are on both SSI and Social Security retirement benefits, then although you may lose all or some of your SSI benefits (albeit possibly only for a short time), you will still be able to keep receiving your Social Security retirement benefits. Nevertheless, you may be subject to higher Medicaid premiums and more taxation.

Do You Have to Report Winnings on Retirement?

Must lottery winnings be reported to the SSA if you are on retirement benefits?

No, you do not have to report your gambling or lottery winnings to the Social Security Administration if you are only receiving Social Security retirement benefits. However, if you are receiving SSI benefits and your Social Security retirement benefits, you must report your lottery winnings.

However, just to be clear, this does not mean that you will not have to report your winnings to the IRS. Although you will not need to report your lottery winnings to the Social Security Administration, you will still have to report them to the IRS. We already went over how winning the lottery can affect your taxation rates.

In fact, your lottery winnings will be reported to the IRS anyway, as the lottery company will end up reporting them. Once the IRS knows about them, the Social Security Administration will find out about them as well.

That is why it is good to report your lottery winnings to the SSA even if you are only receiving Social Security retirement benefits. This way, you can let them know in advance that the money is coming from lottery winnings so that no red flags are raised.

Otherwise, they may end up investigating those earnings, and it can create headaches for you in the future.

Is the Lottery Worth It on Retirement Benefits?

If you are only receiving Social Security retirement benefits, then it is definitely worth it to play the lottery as you will be able to continue receiving your benefits; however, if you are collecting both Social Security retirement benefits and SSI benefits, these changes. In that case, you will be better off playing the lottery only when you have a chance to win a lot of money — in other words, it will be more than what you would lose from not getting SSI benefits.

Will Lottery Winnings Affect SSDI Benefits?

Finally, let’s talk about SSDI benefits. Remember that these two programs are not to be confused with each other as they are entirely separate programs. SSDI benefits are dependent on your average lifetime earnings until you become disabled and go away after you become disabled (or turn into regular Social Security retirement benefits when you become of age).

Will you lose your SSDI benefits if you win the lottery? The short answer is no, you will not lose your SSDI benefits and will continue to be able to collect them even after you win a lottery windfall or win a lot of money through gambling.

Remember that SSDI benefits are not based on income limits like SSI benefits are. If you earn a certain amount of money, you will no longer be considered disabled and thus be ineligible for SSDI benefits. However, this only applies to earned income, such as income that you get from a job. If you work at a job and earn over a certain amount, you will not be considered disabled.

However, lottery winnings are not considered earned income. For that reason, you will still be able to collect your SSDI benefits, regardless of how much money you earned through playing the lottery.

Should You Report Lottery Winnings On SSDI?

As mentioned in regards to standard Social Security retirement benefits, although lottery winnings will not have an impact in that case or this case, you should report them. This way, when the SSA finds out about your winnings from the IRS, they will already know about them, and you will not have to do any further explaining.

Is It Worth Playing the Lottery on SSDI?

Yes. Regardless of how big or small a lottery is, it is worth playing it even if you are receiving SSDI benefits, as your winnings will have zero impact on your SSDI benefits.

What if You Receive Both SSI and SSDI?

This is not as common, but it can happen — you can be receiving SSI and SSDI benefits simultaneously. For that to happen, you will have to have been approved for SSDI benefits, but your SSDI benefits will also have to be very low.

If you have worked very little and thus have a very low average lifetime income, your SSDI benefits, which are based on how much you earned in the past, will be very low. If you become disabled as a child, you might be receiving very low SSDI benefits as well. At that point, since you have little money, you may qualify for need-based SSI benefits.

In that case, winning the lottery will affect you, as you may lose some or all of your SSI benefits. However, you will not lose your SSDI benefits and will continue to receive all of your SSDI benefits in full.

If you are receiving both SSI and SSDI benefits, you will have to report your lottery winnings to the SSA.

What Should You Do if You Win the Lottery on SSI?

If you are on SSI and win the lottery, the best thing to do is contact some professionals who can help you. Get a reliable accountant and an attorney so you can navigate the legal processes you may need to go through, and so you will be able to understand how your benefits will be affected.

Don’t rely on winning the lottery as a retirement plan; remember that it is just a fun pastime. If you win the lottery, make sure to get a financial planner to help you invest and spend your winnings responsibly.

Conclusion

If you are receiving SSI benefits, you stand to lose some or all of them after winning the lottery. Therefore, it’s best to play lotteries that give you a chance to win a lot of money. However, your SSDI and Social Security retirement benefits will not be affected by you winning the lottery. If you are receiving Social Security retirement benefits + SSI benefits or SSDI benefits + SSI benefits, only your SSI benefits will be affected while your other benefits won’t be.

A common concern among those who play the lottery is what will happen to their SSI benefits if they win the jackpot. Will they still be able to collect their winnings, and will they have to give up their SSI benefits as a result of winning?

Do You Have Questions About SSDI And SSI?

At some point in the Social Security Disability application or appeals process, you will have one or more questions. To assist you, The Disability Law Office of Jeffrey S. Lichtman, LLC , has compiled a list of our clients’ frequently asked questions.

Q. What types of benefits are available through Social Security and who is eligible to receive them?

The Social Security Administration (SSA) administers two types of disability benefits.

Social Security Disability Insurance (SSDI) benefits are for people who have worked and paid taxes into the Social Security system over several years. To receive SSDI benefits, you must have been out of work for at least one year or expect to remain out of work for at least one full year due to illness or injury.

Supplemental Security Income (SSI) is not based on taxes paid into the Social Security system. Rather, a person must meet certain financial and U.S. residency requirements in addition to being unable to work. Additionally, children with very severe health problems may receive SSI benefits depending upon their parents’ financial situations.

Some claimants may receive both types of benefits.

Q. What amount can I receive from SSDI or SSI benefits?

For SSDI benefits, the cash benefit depends on the amount of money earned and taxes paid over the years. Monthly benefits can be as low as a few hundred dollars or as high as a few thousand dollars. The Social Security Statement sets forth an estimation of your benefit amounts under the early retirement, full retirement, survivors’ and disability programs.

For SSI benefits, the amount of monthly income is subject to a maximum benefit amount that is increased by an annual cost of living adjustment. In 2020, the maximum benefit amount for an individual is $783; for a couple, $1,175.

Q. Do my assets or my income affect my monthly benefit?

Overall wealth does not affect SSDI benefits. You could win the lottery and still receive your monthly SSDI check. However, receipt of workers’ compensation benefits and certain governmental pensions can reduce your monthly SSDI benefits. The income and assets of a spouse do not impact your SSDI benefit amount.

SSI eligibility is more complicated. All income of an individual or a couple is factored into SSI benefit eligibility and can reduce or eliminate eligibility for benefits. Subject to certain exceptions (such as one home, one car and prepaid burial expenses), an individual cannot have assets — referred to as “resources” — worth $2,000 or more and still be eligible to collect monthly SSI benefits. The resource limit for a couple is $3,000. The resources of a spouse can impact the eligibility for benefits.

Q. Are my children entitled to Social Security benefits if I become disabled?

Until age 18 (or up to 19 if still in high school), the children of a disabled person receiving SSDI benefits can receive a monthly benefit amount based upon the disabled parent’s earnings. However, if the disabled person’s monthly SSDI benefit amount is very low, the children may not be entitled to any benefits.

Children of a disabled person who receives SSI cannot receive any benefits based upon the parent’s disability.

Q. What type of health insurance might I receive through SSDI or SSI?

Recipients of SSDI benefits become entitled to Medicare. Recipients of SSI benefits can usually receive Medicaid health insurance.

Q. Can I still work if I receive SSDI or SSI benefits?

Generally, someone who is working full time is not considered disabled. However, SSA has rules that allow someone to receive disability benefits while performing limited work. These rules are complicated, but if you are earning $1,260 per month or more from work in 2020 (for people who are blind, the limit is $2,160), you are not likely eligible for disability benefits. You should think very carefully before trying to work while receiving benefits.

Q. Do I need an attorney to apply for SSDI or SSI benefits?

It is a wise decision to hire an attorney to assist with a disability claim. As an experienced disability lawyer, I assist clients at all levels of the disability adjudication process, becoming involved in cases at the very beginning by filing the application and undertaking representation immediately before hearings.

Q. How much does an attorney charge?

Most Social Security Disability cases are handled on a contingent-fee basis, meaning the lawyer does not charge any fees unless they obtain benefits for you. The standard fee is either 25 percent of the past-due benefits or $6,000 — whichever amount is less. Once the case concludes, the client receives 100 percent of the ongoing monthly benefits. The attorney has no claim to monies beyond the “past-due benefits.”

For example, if the amount of your benefits is $20,000, the fee will be $5,000. If the past-due benefits amount to $24,000, the fee will be $6,000. If an appeal proceeds to the federal court, the attorney may file a petition for an amount that is greater than $6,000, but not greater than 25 percent of the past-due benefits. If the case is unlikely to yield past-due benefits, an hourly fee needs to be charged.

Q. If I work after I qualify for disability, must I report that to the Social Security Administration?

You must report all work performed for pay to the Social Security Administration! Failure to do so could jeopardize your entitlement to benefits and could result in an overpayment of benefits to you.

Q. What is the maximum amount of money I can earn per month and still secure benefits?

“Substantial gainful activity” is the amount that Social Security has set as the cut-off amount for disability. In 2020, substantial gainful activity level earnings are $1,260 per month ($2,160 per month if you are blind). If you earn more than $1,259.99 per month, you are not disabled under Social Security’s rules no matter how bad your health problems are unless you can show “Impairment-Related Work Expenses” (IRWEs) that bring your income below substantial gainful activity levels. This is a steadfast rule, though the amount that constitutes substantial gainful activity is subject to increases every year.

Q. How much money can I make without jeopardizing my benefits?

While Social Security does allow you to have some earnings while receiving benefits, this can jeopardize your benefits. A trial work month in 2020 is any month in which you earn more than $910. While you can make more than $910 per month and still receive benefits during a trial work period, earnings over $910 raise a red flag for review of your disability and benefits.

Q. How much can I earn if I do not want to get into a trial work period?

If your pay is not greater than $181.99 per week, you should have no trial work months in a year (5 weeks x $182= $910) and be able to earn approximately $10,000 in a year.

Q. Can I earn more than $181 per week without jeopardizing my benefits?

Any month in which you are earning greater than $910 does constitute a trial work month in 2020. Your case could come up for review based on your earnings. While you will be making less than the substantial gainful activity limit of $1,260 per month, Social Security could undertake a continuing disability review and determine that your disability has ceased medically, thereby terminating your entitlement to benefits.

Still Have Questions? Contact Us.

If you still need answers to your questions about Social Security Disability, The Disability Law Office of Jeffrey S. Lichtman, LLC , can help. Get a free consultation with our attorneys in Philadelphia. The law firm also serves New Jersey, Delaware and Southwest Florida. Call 215-268-7274 or send an email.

If you have questions about Social Security Disability benefits, The Disability Law Office of Jeffrey S. Lichtman, LLC, can answer them. Free consultations in Philadelphia. ]]>