Is Being on SSDI Preventing Investors to Contribute to IRAs?

Social Security Disability Insurance (SSDI) provides relief for millions of American who cannot work due to long-term disabilities, providing much-needed income security during retirement years. If a recipient of SSDI wishes to save for retirement in another way, contributing to an Individual Retirement Account (IRA) might be one option available to them; in this article we explore this topic further and consider any associated implications if contributing is possible with SSDI recipients.

Eligibility Requirements for Contributing to an IRA

The cornerstone rule for making contributions directly into an IRA is earned income; this may include wages, salaries, tips, or self-employment income. SSDI benefits do not count as earned income so individuals reliant solely on SSDI should not contribute directly.

Spousal IRA Exception

When married and both parties earn income, an exception allows one spouse to make contributions for your IRA even without their own earnings - known as a Spousal IRA Exception - even without your own having earned income of their own. Under this provision, your partner is permitted to make contributions on your behalf provided they earn enough income themselves to cover such payments.

Impact on SSDI Benefits

If you qualify to contribute to an IRA through either Spousal IRAs or some other source of earned income, it is critical to understand how contributing might impede or detract from SSDI eligibility. The Social Security Administration has designated certain resource limits which if exceeded can void eligibility for SSDI payments.

As contributions to an IRA typically do not count against eligibility criteria for SSDI benefits, contributing should have no adverse impact on them. It would still be wise, however, to consult a financial adviser or attorney experienced with Social Security law to make sure there won't be any unintended effects from making contributions to an IRA.

Contributing to an IRA May Offer Tax Benefits

Traditional IRAs allow you to deduct contributions from taxable income, thus lowering current taxes due. Roth IRAs on the other hand permit for tax-free withdrawals during retirement years - although its implications can become complicated if receiving SSDI at the same time; it would be prudent to consult a tax professional.

Conclusion

SSDI recipients with no other source of income cannot contribute to an IRA; however, those with earned income (such as from working spouse or earned income) might be eligible to make contributions. For a comprehensive decision process regarding both SSDI and IRA contributions it's crucial that one carefully study both types of contribution regulations - speaking with financial planning or tax professionals will give valuable advice that fits with overall savings goals while protecting SSDI eligibility.