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? ›

Will withdrawals from my individual retirement account affect my Social Security benefits? Social Security does not count pension payments, annuities, or the interest or dividends from your savings and investments as earnings. They do not lower your Social Security retirement benefits.

Roth IRA distributions have no effect on Social Security benefits, including the earnings test or taxation of benefits. Any unearned income, such as interest or dividends, doesn't affect your ability to collect Social Security, but it can make more of your benefits taxable.

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.

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.

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

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.

retirement age during the whole year

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

The short answer is no, taking a distribution from your 401(k) does not impact your eligibility for (or the amount of) your Social Security benefits. Since a 401(k) comes from an employer and Social Security comes from the government, these two sources of income are completely separate.

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.

Using Your 401(k) to Delay Getting Social Security and Increase Payments. Your 401(k) can be a bridge from retirement to higher monthly income. Although you can start collecting Social Security at age 62, you can get much higher monthly payments if you wait as long as age 70.

Does a retirement account count as income? ›

Federal taxes on retirement accounts

If you have a traditional 401(k) or traditional IRA, the IRS generally requires that you begin to take annual required minimum distributions (RMDs) during the year in which you turn 73 years old. Withdrawals from those accounts are generally taxed as ordinary income.

If you receive retirement benefits in the form of pension or annuity payments from a qualified employer retirement plan, all or some portion of the amounts you receive may be taxable unless the payment is a qualified distribution from a designated Roth account.

The 4% rule limits annual withdrawals from your retirement accounts to 4% of the total balance in your first year of retirement. That means if you retire with $1 million saved, you'd take out $40,000. According to the rule, this amount is safe enough that you won't risk running out of money during a 30-year retirement.

Will withdrawals from my individual retirement account affect my Social Security benefits? Social Security does not count pension payments, annuities, or the interest or dividends from your savings and investments as earnings. They do not lower your Social Security retirement benefits.

Your Social Security benefit might be reduced if you get a pension from an employer who wasn't required to withhold Social Security taxes. This reduction is called the “Windfall Elimination Provision” (WEP). It most commonly affects government work or work in other countries.

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.

Social Security won't stop you from funding an IRA

You're allowed to collect Social Security even if you're working on a full-time basis. And once you reach FRA, you can earn any amount of income without it impacting your benefits.

Your IRA withdrawals could affect your Medicare premiums. Your income from an IRA could result in more of your Social Security being taxed. You may be able to avoid an early withdrawal penalty in certain circ*mstances.

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.

“pre-tax contributions that you make to an employer-sponsored retirement plan such as a 401(k) reduce your income tax, but they do not reduce your Social Security tax. The same goes for traditional IRA contributions, as well as contributions to a SEP or SIMPLE IRA.