What Is an IRA
An IRA, or Individual Retirement Account, is a personal savings account with tax advantages designed to help you build retirement savings. There are two main types: a Traditional IRA, where contributions may be tax-deductible, and a Roth IRA, where contributions are made with after-tax dollars but withdrawals in retirement are tax-free.
For people applying for government benefits, IRAs matter because they count as assets. Depending on the benefit program you're applying for, the value of your IRA can affect your eligibility and the amount of assistance you receive.
How IRAs Affect Government Benefits
Different benefit programs treat IRAs differently when determining eligibility.
- SNAP (food assistance): Traditional and Roth IRAs are excluded from asset limits. You can have an IRA and still qualify for SNAP if your income meets the threshold, which is 130 percent of the federal poverty line for most households.
- Medicaid: IRAs are typically excluded as countable assets in most states. However, money you've already withdrawn from an IRA and placed in a regular bank account does count toward asset limits, which vary by state but often fall between $2,000 and $5,000 for individuals.
- TANF (Temporary Assistance for Needy Families): IRAs are generally excluded, though some states have exceptions. Asset limits for TANF are stricter than SNAP, typically around $2,000 to $3,000 per household.
- WIC (Women, Infants, and Children): IRAs do not count toward income or asset limits for WIC eligibility.
The key rule: money inside the IRA does not count. Money you withdraw and hold elsewhere does count toward your assets.
When You Need to Report IRA Withdrawals
If you withdraw money from an IRA before applying for benefits, you must report that withdrawal as income on your benefit application. The amount withdrawn counts as income in the month received. This can push your household over income limits for certain programs. If you need money, contact your local benefits office before making a withdrawal to understand how it affects your eligibility.
With a Traditional IRA, withdrawals are taxed as ordinary income. With a Roth IRA, qualified withdrawals are tax-free, though early withdrawals of contributions (not earnings) are allowed penalty-free. Neither type is penalty-free under benefit rules, however.
Common Questions
- Can I have an IRA and still get SNAP or Medicaid? Yes. IRAs are excluded assets for both programs. Your eligibility depends on your income and other countable assets, not your IRA balance.
- What happens if I withdraw from my IRA right before I apply? The withdrawn amount counts as income in that month, which can temporarily disqualify you or reduce your benefit amount. If you're considering a withdrawal, apply first, then withdraw if needed.
- Does my spouse's IRA affect my benefits? In most cases, yes. Spouse assets are counted as household assets when determining eligibility. Check with your local benefits office for your state's specific rules.