Will withdrawals from my individual retirement account affect my Social Security benefits? (2024)

FAQs

Will withdrawals from my individual retirement account affect my Social Security benefits? ›

Key Points. If you claim Social Security before reaching full retirement age, earnings from a job could result in having some benefits withheld. Withdrawals from a retirement plan won't affect your monthly benefit amount.

If you withdraw money from a traditional IRA, it won't affect your ability to claim and collect Social Security benefits. However, a traditional IRA distribution is considered taxable income, and can result in some of your Social Security benefits being subject to income tax.

The simple answer is that income that you receive from your 401(k) or other qualified retirement plan does not affect the amount of the Social Security retirement benefit that you receive each month.

Pension payments, annuities, and the interest or dividends from your savings and investments are not earnings for Social Security purposes.

You can take distributions from your IRA (including your SEP-IRA or SIMPLE-IRA) at any time. There is no need to show a hardship to take a distribution. However, your distribution will be includible in your taxable income and it may be subject to a 10% additional tax if you're under age 59 1/2.

When we figure out how much to deduct from your benefits, we count only the wages you make from your job or your net earnings if you're self-employed. We include bonuses, commissions, and vacation pay.

For the earnings limits, we don't count income such as other government benefits, investment earnings, interest, pensions, annuities, and capital gains.

"A Roth IRA or Roth 401(k) can help you save on taxes in retirement. Not only are withdrawals potentially tax-free,² they won't impact the taxation of your Social Security benefit.

Is a 401(K) Withdrawal Considered Earned Income or Capital Gains? Traditional 401(k) withdrawals are considered income (regardless of your age). However, you won't pay capital gains taxes on these funds.

An early withdrawal from a 401(k) plan typically counts as taxable income. You'll also have to pay a 10% penalty on the amount withdrawn if you're under the age of 59½.

What would cause my Social Security benefits to decrease? ›

We reduce your benefits if you start early by about 0.5 percentage points on average for each month you start receiving benefits before your full retirement age. For example, if your full retirement age is 67, and you sign up for Social Security when you're 62, you would only get about 70% of your full benefit.

Income is anything you receive during a calendar month and can use to meet your needs for food or shelter. It may be in cash or in kind.

If there were some years you didn't work or had low earnings, your benefit amount may be lower than if you had worked steadily. The age at which you decide to retire also affects your benefit. If you retire at age 62, the earliest possible Social Security retirement age, your benefit will be lower than if you wait.

By age 59.5 (and in some cases, age 55), you will be eligible to begin withdrawing money from your 401(k) without having to pay a penalty tax. You'll simply need to contact your plan administrator or log into your account online and request a withdrawal.

Social Security income can be taxable no matter how old you are. It all depends on whether your total combined income exceeds a certain level set for your filing status. You may have heard that Social Security income is not taxed after age 70; this is false.

Traditional 401(k) withdrawals are taxed at the account owner's current income tax rate. In general, Roth 401(k) withdrawals are not taxable, provided the account was opened at least five years ago and the account owner is age 59½ or older.

Do RMDs impact Social Security and Medicare? RMDs generally increase an account owner's taxable income. Certain Social Security and Medicare calculations can be impacted. For example, a portion of Social Security benefits can be taxed for those whose RMDs push them above certain income thresholds.

Do 401k withdrawals count as income for Medicare? The Medicare Part B Premium charged by the government changes based on your income. Taking tax-free Roth withdrawals won't affect this Medicare premium. But the distributions you take from traditional IRAs count as income for your Part B Premium.