Can you contribute to an IRA while collecting social security? This is a common question among retirees and pre-retirees who are looking to maximize their retirement savings. The answer is yes, you can contribute to an IRA while receiving social security benefits. However, there are certain rules and limitations to keep in mind to ensure you’re making the most of your retirement savings. In this article, we’ll explore the ins and outs of contributing to an IRA while collecting social security.
Firstly, it’s important to understand that contributing to an IRA while receiving social security benefits does not affect your eligibility for these benefits. The Social Security Administration does not consider IRA contributions when determining your benefits. Therefore, you can continue to contribute to your IRA regardless of whether you’re receiving social security or not.
There are two types of IRAs: traditional IRAs and Roth IRAs. The rules for contributing to each type of IRA while collecting social security benefits are slightly different.
For traditional IRAs, you can contribute to your account until you reach age 70½, regardless of your income or whether you’re receiving social security benefits. However, if you’re still working and earning income, there are additional rules to consider. If you’re covered by a retirement plan at work, you may not be able to contribute to a traditional IRA if your income exceeds certain limits. For the tax year 2021, if you’re married and filing jointly, you can’t contribute to a traditional IRA if your modified adjusted gross income (MAGI) is more than $198,000. If you’re single, the limit is $125,000. If you’re married and filing separately, the limit is $10,000.
On the other hand, Roth IRAs have no income limits, so you can contribute to a Roth IRA regardless of your income or whether you’re receiving social security benefits. However, you must have earned income to contribute to a Roth IRA. The contribution limit for both traditional and Roth IRAs in 2021 is $6,000, with an additional $1,000 catch-up contribution for individuals aged 50 or older.
It’s also worth noting that the IRS may impose a penalty if you withdraw funds from your IRA before age 59½, except for certain exceptions, such as disability, medical expenses, or higher education expenses. However, if you’re receiving social security benefits, you may be eligible for penalty-free withdrawals in certain situations.
In conclusion, you can contribute to an IRA while collecting social security benefits. However, it’s crucial to understand the rules and limitations to ensure you’re making the most of your retirement savings. Be sure to consult with a financial advisor or tax professional to determine the best approach for your individual situation.
