IRA Rollover

Archive for May, 2010

Question: Are “earnings” from a 401(k) rollover to a Roth IRA considered in “substantial gainful activity” S.S.A. calcs.?

. . . since the Internal Revenue Service taxes them as “earned income” in the year that you roll them over to the IRA, since they weren’t taxed during the tax years when they were being earned and deposited into the 401 (k)?

Or, is the IRS definition of “earned income” different from the Social Security Administration definition of “gainful activity” “earned income”, in this case, since you weren’t doing any work to earn the now-taxed income in the specific year that the rollover to the IRA takes place?

Answer: The IRS’s definition is referring to income earned in previous years. SSD only counts income earned after you claimed becoming disabled. If you claimed becoming disabled today, SSD would only be interested if you were working, earning income today and in the future.

SSDI also would not disqualify you because of any assets earned before becoming disabled. So even cashing out a 401K would not effect it.