Can You Contribute to an IRA If You Are on SSDI?

Can you contribute to an IRA if you are on SSDI

There are two forms of federal disability assistance, SSI and SSDI. While IRAs are an ideal way for anyone looking to save money and take advantage of tax breaks, those living with disabilities may wonder whether their disability benefits can be used as the funding for an IRA.

Contribution Limits

IRAs are tax-deferred savings accounts that allow you to invest your pretax income tax-free. If you collect SSDI, however, the IRS only permits a maximum contribution limit each year of $6500 for people under 50 and $7500 for those over 50.

SSDI differs from Supplemental Security Income in that it does not consider your financial resources (like investments ) when calculating benefits; however, should you withdraw funds from an IRA to pay for expenses like a car purchase, home purchase or burial plot, then SSDI may consider these withdrawals countable income.

New legislation seeks to change this. The ABLE Act was approved in April 2018 and will expand eligibility for retirement savings accounts among people with disabilities who have worked at least some hours and earned at least minimum wage, making the funds more readily accessible for qualifying disability expenses.

Roth IRAs

Earned income can include salary, wages, tips and bonuses from employment as well as self-employment activities such as rental properties or consulting; investment earnings do not count towards earning income. Withdrawals from a Roth account qualify for tax-free withdrawals under certain criteria such as having owned the account for at least five years.

If you have a disability and receive Social Security Disability benefits, and contribute to an IRA with income under the contribution limit for that year. You could even add extra earnings such as driving for Lyft or Uber to supplement your SSDI benefits; just be mindful that Social Security Administration views any additional earnings as potential financial resources that could reduce or even prohibit receiving your benefits in full.

Traditional IRAs

SSDI beneficiaries can still open an IRA account; however, you may not be eligible to deduct your contributions because the IRS only permits such deductions on income considered earned – such as wages from employment or earnings from self-employment.

Traditional IRAs provide multiple advantages, including tax-deferred growth potential and tax-free withdrawals in retirement. If itemizing, they also allow an above-the-line deduction on federal income taxes.

Social Security Disability payments do not count as earned income and therefore do not qualify for contribution to a Traditional IRA account. You can still invest SSDI funds by opening a taxable brokerage account; though you will owe taxes upon withdrawals in the future. Furthermore, withdrawals must begin no later than age 73 (or earlier if certain hardships exist).


Individual Retirement Accounts (IRAs) are tax-advantaged savings vehicles designed to help investors invest in various financial products tax efficiently. There are different kinds of IRAs – traditional, Roth, SEP and SIMPLE for small-business owners or self-employed individuals; working with an experienced financial advisor will help determine the appropriate IRA for you and your circumstances.

Contributions to an Individual Retirement Account (IRA) require earned income as defined by the IRS. Social Security disability benefits do not count as earned income and therefore cannot be used to fund an IRA account. If you work while receiving disability supplemental benefits, though, earnings can still be invested into either a traditional or Roth IRA; once you reach 72 years old however you will be required to take required minimum distributions that could potentially impact SSDI eligibility – for more advice regarding this matter consult an experienced advisor.

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