Does anyone know if I am allowed to invest in a Roth IRA while on disability (private LTD insurance + social security insurance) or invest in any kind of tax advantaged retirement plan?

Thanks.

That's a tricky question.

You must have earned income to contribute to any kind of IRA.

Social security benefits are not earned income.

But disability payments from a private plan MIGHT be earned income depending on who paid the original premiums. If your employer paid the premiums or if they were paid before taxes then the benefits might be considered earned income and that would enable you to contribute to an IRA.

You will probably need to contact your employer and your insurance company to make the determination. There is no general rule about whether private disability insurance payments are earned income.

I also suspect that any disability benefit that is taxable is done via a 1099.

Yes. The problem is, it's not just a matter of being taxable. It has to be earned income. Sometimes when you receive rents or various types of investment income it is reported on a 1099 but those things are not earned income. Starting this year a lot more payments will be 1099-ed but that does not make them earned or even necessarily taxable.

On the bright side, you don't need a retirement account to invest. And if your income is low enough, it won't save you much on taxes anyway.

Not true. Disability payments generally stop at retirement age. SS disability also stops but converts to SS retirement which is mostly a wash. If you want to continue your total income including the disability insurance payments you will probably need to invest just like you do while working.

What you said doesn't match up with what I said. I said you don't need a retirement account to invest. The implication being you can invest in a normal non-retirement taxable account.

Ok, I thought you were saying that someone on disability does not need to invest for retirement - the implication being that the disability payments continue forever. I guess I misunderstood you.

But even so, although you can invest in a regular taxable account while on disability, one could gain similar tax benefits by using tax-deferred accounts instead, although the tax benefits would presumably be lower since the income would likely be lower.

You should read the 2013 tax laws as they stand now.