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SSDI: Can benefits be invested into a Roth IRA?

Many people look into opening a Roth IRA due to the benefits they can gain, but can you invest SSDI or other benefits into it?

SSDI paperwork on a desk being filled out with a pen

It depends.

One of the investments that can go into a Roth IRA is compensation, or earned income.

If you’re on SSDI, you need to understand when you can or cannot contribute.

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What is considered earned income by the IRS?

  • Wages
  • Salaries
  • Tips
  • Professional fees
  • Bonuses
  • Commissions
  • Self employment income
  • Alimony
  • Nontaxable combat pay
  • Scholarships or fellowships for graduate school

What is not considered earned income by the IRS?

  • Rental income
  • Interest income
  • Dividend income
  • Pension and annuity income
  • Deferred compensation
  • Amounts excluded from income

What you can put toward your IRA is determined by your income and filing status.

The most you can contribute in 2022 in $6,000.

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Can SSDI be invested into a Roth IRA?

SSDI and SSI are payments given to those with disabilities who paid into Social Security Insurance or those with disabilities and limited income.

The IRS determines that SSI and SSDI are not earned income.

Military disability income does not count as earned income.

One exception is disability retirement benefits that were received before reaching your full retirement age.

You may not use SSDI or SSI for a Roth IRA if they’re your only source of income.

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What are other things you can or cannot do with SSDI or SSI?

You may invest them into regular stocks, but not a Roth IRA.

It is not illegal to trade stocks while on SSDI or SSI.

You may take money out of your IRA if you become permanently disabled with no tax penalty.

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