How can you balance saving with the asset limits on federal and state benefits?

“How can you help people who are going to get bumped off their subsidized food and housing because they have assets? Then the federal and state agencies say ‘Hey, all is well now.” They may be making more, but not enough yet to sustain themselves, landing them right back in poverty. I’ve seen this happen to one woman who was told she had to work after a certain number of months. So, she did. Then she no longer qualified for the apartment she was in. She got a roomie for her new place. But that income in her house meant she no longer qualified for food stamps. She did what she was supposed to do and now her life is no better and, in fact, worse. So, if you have savings, it can hurt you. It’s not right, but that’s the way it is.”

Submitted by Jody L.

What you are describing is called “asset means testing.” You’ve touched on a hot topic for those of us in the business of helping people save money. Your story describes the situation that many people are facing if they receive public benefits and try to increase their income or save for emergencies.

What are Asset Limits?

Asset limits determine a person’s eligibility for public benefits programs. This is a very complex topic, so let’s start with this overview from Prosperity Now, a nonprofit agency that focuses on the policy solutions that affect poverty:

“Many public benefit programs—such as cash welfare, food assistance and heating assistance—limit eligibility to those with few or no assets. If individuals or families have assets exceeding the state’s limit, they must “spend down” longer-term savings in order to receive what is often short-term public assistance. These asset limits, which were originally created to ensure that public resources did not go to “asset-rich” individuals, are a relic of entitlement policies that in some cases no longer exist. Cash welfare programs, for example, now focus on quickly moving individuals and families to self-sufficiency, rather than allowing them to receive benefits indefinitely. Personal savings and assets are precisely the kinds of resources that allow people to move off public benefit programs. Yet, asset limits can discourage anyone considering or receiving public benefits from saving for the future.”

We certainly don’t want people to take advantage of programs that are intended for those experiencing poverty. But as you noticed, this often becomes a “catch-22” if you are trying to work your way out of poverty.

How to Save While Receiving Benefits

So, what can you do to better your financial life if you are on public benefits?

• Find a local nonprofit agency that understands asset limits and helps people manage the paradox of building financial security while on public benefits.
• Know the asset limits in your state and for the benefits you are receiving. This doesn’t mean you can’t save. You just want to make sure that you don’t do harm to your overall financial situation.
• There are a growing number of accounts that are not included in asset means testing. But be sure to check each type of account and the relevant benefits. See this overview of SNAP for an example.
• Be mindful of any financial choices that impact your benefits. This is not to say that you should not take a job that moves you towards your goal. However, if a job doesn’t provide benefits (especially medical) and doesn’t pay well enough for you to manage without benefits, this may be an indicator that you should keep looking until you find employment that meets your needs.

The good news is that there are many organizations and people in the trenches fighting too. In some states, the efforts to repeal the means test is working. Prosperity Now has a Scorecard that tracks how states are doing regarding public benefits and asset limits. Check out your state and ways you can get involved if this issue is a hot topic for you too!