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Is Social Security Income?

by Jason on September 22, 2011

Here’s a question about Social Security that I came across not too long ago:

I’m in my 60’s and am receiving Social Security every month.  How much, if any, can I still contribute to my Roth IRA?

 

 

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In other words, the question is  – Is Social Security income?  Or more specifically, is it earned income.  So here’s the answer:

Social Security Does Count as Income

Yes, Social Security is definitely income received.  However, it doesn’t mean it’s fully taxable.  To the extent that the IRS looks at your Social Security as income that must be included for tax purposes depends upon how much income you earn from other sources and your marital status.

In 2010, the IRS has base amounts of:

  • $32,000 for married couples filing jointly
  • $25,000 for single, head of household, qualifying widow/widower with a dependent child, or married individuals filing separately who did not live with their spouses at any time during the year
  • $0 for married persons filing separately who lived together during the year

In other words, if you make more than the base amounts you must include Social Security as income for tax purposes.  To learn more check out Publication 915 from the IRS.

Social Security Does Not Count as Earned Income

Is Social Security income?  Not in the sense of earned income. Social Security income is not earned. In order to contribute to a Roth IRA (as the question asks) or a Traditional IRA, you must have earned income equal to the amount of your contribution.

Earned income includes:

  • wages
  • salaries
  • commissions
  • professional fees
  • bonuses
  • self-employment income, etc.

 

You could have income from any of these sources and contribute that earned income to a Roth IRA or Traditional IRA.

The max contributions for 2011 are $5,000 per individual under age 50 and $6,000 per individual if over age 50.

The Answer to the Question

The answer to this question is, “It depends.”  It really depends if this individual is receiving any type of earned income.  If so, then they can contribute any amount of that earned income up to $6,000.

If Social Security is their only source of income, then the answer is no, they cannot contribute to a Roth IRA.

Have a Question?

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