Many people who suffer disabilities rely on government programs for assistance. The Social Security Administration is involved in two different programs -- Social Security Disability Insurance and Supplemental Security Income, both of which can help those suffering from a disability. However, those who have IRAs or receive distributions from an IRA can have their disability benefits affected. Let's look at the different rules that apply to each program.
Social Security Disability Insurance: no impact
The Social Security Disability Insurance program pays benefits to those who have a long-term disability that prevents them from working. The program is not means-tested, and you can receive benefits regardless of how much income you have from non-work sources like investments or how much in financial resources you have set aside.
As a result, owning an IRA or taking distributions from it won't have an impact on how much you get from the Social Security Disability Insurance program. As long as you've worked long enough to be eligible to receive disability benefits and you are unable to generate income from work over a relatively low threshold amount, then you can take IRA distributions and still get full disability benefits at the same time.
Supplemental Security Income: big impact
By contrast, the Supplemental Security Income program is designed for low-income individuals with little or no financial resources. If you have access to an IRA in your own name, then the SSA can treat it as a financial resource that's available to you, and it can require that you spend down your IRA funds before you can become eligible to receive SSI disability benefits.
In addition, even if the IRA itself isn't treated as your financial resource, any income you receive from it can count as a financial resource on its own. For example, if you inherit an IRA and it distributes money to you, then the SSA can reduce or suspend benefits accordingly as long as that money is available to you.
Whether IRA withdrawals will affect any rights you have under other programs depends on the specifics of the program. In general, though, if the program focuses on physical condition as the primary prerequisite for getting benefits, then withdrawals from an IRA are less likely to be a problem than if the program also focuses on financial resources and income.
Getting the help you need when you're disabled can be a challenge. By being aware of how rules govern IRA withdrawals, you can make sure you don't cut off needed financial assistance at the worst possible time. To learn even more about the ins and outs of IRAs, or even if you're just getting started, we have more information available at our IRA Center.
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