If You're a Gig Worker, Here's How You Can Still Get Disability Protection
Company benefits are great to have, but if you're a contractor, chances are you're out of luck. And if you get injured or are too sick to work, you could quickly find yourself in hot water. However, those self-employment taxes you’re paying come with a federal benefit ready to act as your safety net.
The modern gig economy, dependent on contract workers, offers flexible jobs to millions of people, but only so long as these people are able to show up. No work, no pay, no benefits.
More traditional part-time workers can face a similar situation. As the economy booms, demand for seasonal workers is on the rise. Retailer Kohl’s announced it will increase holiday hiring to 90,000 people this year, and Target will hire 120,000 people this year — up from 100,000 in 2017. Most of these workers also will not be eligible for company benefits.
Most part-time employees do have one advantage over freelancers: access to workers’ compensation benefits, as long as they receive a wage and have taxes deducted from their paychecks. On the other hand, companies generally are not required to provide workers’ compensation coverage to independent contractors. If these workers get injured on the job, they may have few supports. Some very small companies are excluded from this requirement as well. One way to verify your options is to check with your state, as requirements vary. Here is a resource from the National Federation of Independent Business. Yet the Social Security Administration (SSA) estimates one in four 20-year-olds will be disabled before reaching age 67.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
At the national level and across some states, there has been some discussion of – though not much movement toward — a system of “portable benefits” that would follow individuals across their variety of gig employments. This would provide a much-needed safety net for surviving a job interruption. According to the Federal Reserve Board’s 2015 survey regarding household economics, 53% of adults don't have a rainy day fund that could cover them for even three months of living expenses. Almost half reported not having enough cash to cover a $400 emergency expense.
Your Disability Safety Net: SSDI
Until such a system gets implemented, it’s good to know that there is already a program in place designed to help today’s part-timers and gig workers: the Social Security Disability Insurance (SSDI) program. SSDI is an income replacement insurance for former workers with disabilities, provided through the Social Security Administration. To be clear, this “insurance” is not something you have to sign up for or buy. If you pay FICA or self-employment taxes, you are already paying into it and are on your way to being covered. Workers who earn at least $1,360 (in 2019) per quarter get credit toward their disability insurance. Typically, to be covered you must have paid FICA payroll or self-employment taxes for five out of the last 10 years.
SSDI benefits are portable — available if you meet eligibility requirements, no matter how many different companies you were employed by.
When someone experiences a severe disability that prevents them from working for 12 months or more, SSDI also unlocks other important benefits, such as Medicare prior to age 65, dependent benefits and return to work support. SSDI continues until the individual is able to return to work on a regular basis or until retirement age, when old age benefits kick in. It has the added advantage of protecting future retirement benefit income.
Applying for SSDI Benefits
Although more than 2 million people apply for SSDI benefits each year, doing so is ultimately a personal decision. The experience is different for everyone. Work history, education, age and mental or physical conditions can all impact the SSDI process and your outcome.
To be eligible for benefits, you have to meet the work history requirements and be able to prove that your condition prevents you from working. Provided you meet the SSA’s requirements, SSDI is an extremely valuable resource to keep in mind if you experience a disability without private long-term disability insurance or workers’ compensation protection.
Crime Never Pays, But Honesty Does
SSDI is a huge advantage of a more standardized gig economy. Drivers for companies like Uber and Lyft work “on the books,” meaning they must file taxes each year as self-employed workers, which includes payroll taxes. Besides breaking the law, individuals who work side jobs for cash without reporting to the IRS will not be eligible for Social Security programs like SSDI.
Those FICA deductions can be a hefty amount of each paycheck, but they’re especially important for gig, part-time, contract and seasonal workers who have limited options for protecting themselves and their families if they can’t work because of a disability.
No matter which — or how many — companies you work for, SSDI can be there to catch you when things take a turn for the worse.
Mike Stein, assistant vice president of operations strategy and planning, has 25 years experience helping people with disabilities through his work with Allsup. He oversees the claims operations for both Social Security Disability Insurance representation and the Veterans Disability Appeal Service for veterans. During this time, he has become an authority on the SSDI application process, as well as Social Security Administration programs.
-
What Experts See In Economic Signals For 2024
Experts assess economic signals for 2024.
By Simon Constable Published
-
Single? This Is How Much You Have To Earn To Live Comfortably
In New York, a single person needs to earn $138,570, while in Cleveland, Ohio an individual can earn $81,786 and live comfortably, according to a Smart Asset survey.
By Kathryn Pomroy Published
-
Avoid Surprises: Don’t Procrastinate on Your Taxes
You really should start thinking about next year’s taxes immediately after filing this year’s. Better tax efficiency could save you some serious dough.
By Jared Elson, Investment Adviser Published
-
How Gig Workers Can Prepare Their Estate and Financial Plans
Freelancers have to be vigilant to keep track of where their money goes, whether it’s to cover daily necessities, saving for retirement or other expenses.
By David Handler, J.D. Published
-
When Flying Toward Retirement, Secure Your Own Mask First
Parents often feel compelled to help their kids pay for college, but when that could result in you moving in with them later, you should put your savings first.
By Andrew Rosen, CFP®, CEP Published
-
Nine Personal Finance Podcasts Worth Checking Out
Business professionals give shout-outs to favorite podcasts aimed at helping listeners improve their financial literacy and manage their money responsibly.
By Anthony Martin Published
-
Before You Claim Social Security, What’s Your Income Plan?
If you’ll have multiple income streams in retirement, you’ll need to coordinate everything so you don’t end up paying taxes on your Social Security benefits.
By Nick Stahl Published
-
Should a Donor-Advised Fund Be Part of Your Estate Plan?
A donor-advised fund, or DAF, lets the donor reap tax benefits while also being able to direct how the money is distributed and invested.
By Tracy Craig, Fellow, ACTEC, AEP® Published
-
In Gray Divorce, Two Financial Planning Yardsticks Are Key
Watching your budget helps you reduce unnecessary expenses, and keeping an eye on your net worth as it rebuilds can provide a psychological boost.
By Andrew Hatherley, CDFA®, CRPC® Published
-
How Quitclaim Deeds Can Cause Estate Planning Catastrophes
A lot can go wrong (including inadvertent law-breaking) if you choose to go the easy route rather than using a trust to transfer real estate to your child.
By Rustin Diehl, JD, LLM Published