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Can You Invest Your Social Security Disability Benefits Into A Roth IRA?


If you receive Social Security Disability Insurance (SDDI) benefits, you may be interested in knowing how to use them to your advantage. If you have a little extra at the end of the month after paying all your bills, you may want to know about viable investments. For example, can you invest in a Roth IRA?

You may think, sure, why not? It’s your money, after all. You should be able to do what you want with it, right? Not necessarily.

In order to make contributions to a Roth IRA account, you need to have compensation, or earned income. In this case, Social Security Disability benefits are generally not considered earned income.

Earned income must meet IRS income guidelines. These guidelines includes money from various sources, such as:

  • Wages, salaries, bonuses, and tips from employment
  • Self-employment income
  • Commissions
  • Alimony
  • Scholarships associated with graduate degree programs

The following sources of income do not count as earned income:

  • Rental income
  • Interest or dividend income
  • Pensions
  • Annuities

What this means is that if Social Security Disability benefits are your only source of income, then you cannot contribute to a Roth IRA. However, there’s a catch. If you’re receiving both earned income and Social Security Disability benefits, then you need to be mindful of how much money you are earning. That’s because the primary goal of Social Security Disability benefits is to provide benefits to those who cannot work due to a disability. If you are earning more than $1,350 a month, then you are considered gainfully employed and therefore not entitled to benefits.

There is a workaround, though. You could open a taxable brokerage account. While you would no longer have to be concerned about income guidelines, you would lose out on tax-free qualified withdrawals. But this would allow you to invest your SSDI payments, since you’re not limited as to how much you can have in financial resources.

What Else to Know

If you receive Social Security Disability benefits and don’t have any earned income, then you won’t be able to contribute to a Roth IRA account. However, if you have an IRA account already and become permanently disabled, you are allowed to withdraw money without triggering a tax penalty.

Even though you won’t be able to open an IRA account while on SSDI, there are other investment options available to you. For example, an annuity or a taxable brokerage account are a couple options. The Social Security Administration will also allow you to trade stocks and other securities.

Learn More About Social Security Disability Benefits

There are limits as to what you can do with your Social Security Disability benefits. Certain investments are limited to those who earn wages. Receiving government benefits does not usually qualify.

A White Plains Social Security Disability lawyer from The Law Office of Michael Lawrence Varon can help you understand your benefits and how you can best use them to your advantage. To schedule a free consultation, fill out the online form or call 914-294-2145.



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