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.
![](https://cdn.mos.cms.futurecdn.net/CN3SXKwMSLv5pdvEBhS5c-415-80.jpg)
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.
![https://cdn.mos.cms.futurecdn.net/hwgJ7osrMtUWhk5koeVme7-200-80.png](https://cdn.mos.cms.futurecdn.net/hwgJ7osrMtUWhk5koeVme7-320-80.png)
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.
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
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.
-
Visa Is the Worst Dow Stock Wednesday. Here's Why
Visa stock is down sharply Wednesday after the credit card company came up short of revenue expectations for its fiscal Q3.
By Joey Solitro Published
-
Another Analyst Moves to the Sidelines on Tesla Stock After Earnings
Tesla stock is spiraling Wednesday after the EV maker's big earnings miss and Wall Street has been quick to weigh in. Here's what you need to know.
By Joey Solitro Published
-
Confused by Annuities? Making Sense of the Different Types
Many investors aren't sure if annuities are a good option for meeting financial goals. Let's look at the different categories, along with their pros and cons.
By Kris Maksimovich, AIF®, CRPC®, CPFA®, CRC® Published
-
Talkin' 'Bout My Generational Wealth: Baby Boomers
With retirement, each generation has different priorities and challenges. For Baby Boomers, it's a matter of ready or not, here it comes.
By Alvina Lo Published
-
How to Avoid a Big Hassle if Your Financed Car Gets Wrecked
How an insurance check is made out for repairs can cause a world of problems if the lienholder is left out.
By H. Dennis Beaver, Esq. Published
-
Estate Planning Strategies to Consider as Election Nears
Are big changes in tax laws coming soon? Not likely, but you might want to take advantage of higher estate and gift tax exemptions well before the end of 2025.
By David Handler, J.D. Published
-
How to Get Your Money's Worth From Your Financial Adviser
A good financial adviser will focus on how your financial planning and investment strategy align with your lifestyle and aspirations.
By Pam Krueger Published
-
Think of Prenups and Postnups as Financial Planning Tools
These contracts provide a clear framework for asset management and protection and are especially useful if you get married later in life.
By Andrew Hatherley, CDFA®, CRPC® Published
-
Congratulations on Your Raise: Three Things to Do With It
We're not saying you shouldn't spend it on a new car, but there are some considerations to guard against lifestyle creep and to help ensure a comfy retirement.
By Andrew Rosen, CFP®, CEP Published
-
Check Off These Four Financial Tasks to Finish 2024 Strong
The new year is a popular time to set financial goals, but now is the ideal time to check how you're doing. Four tweaks could make a big difference.
By Daniel Razvi, Esquire Published