Do IRA withdrawals affect Social Security benefits?

Traditional IRA disbursements will not reduce the benefit amount you receive from Social Security. However, they may cause part of your retirement benefits to become taxable.

Does IRA withdrawal count as earned income for Social Security?

Although the IRS counts your IRA distributions as income to determine how much taxes you owe, the Social Security Administration does not count them as income.

Is an IRA withdrawal considered earned income?

Retirement withdrawals do not count toward the Earned Income Limitation. The limitation applies to income from labor such as wages, salary, or self-employment income. A $25,000 IRA distribution would add more than $25,000 of taxable income.

Should I take money from IRA before claiming Social Security?

There are actually tax benefits to tapping your IRA before your Social Security checks, said Ed Slott, a retirement savings expert. If you start withdrawing from your IRA at, say, 62, your account balance is likely to be smaller by the time you’re 70½ —when you’ll be subject to required minimum distributions.

What type of income reduces Social Security benefits?

If you are younger than full retirement age and earn more than the yearly earnings limit, we may reduce your benefit amount. If you are under full retirement age for the entire year, we deduct $1 from your benefit payments for every $2 you earn above the annual limit. For 2021, that limit is $18,960.

At what age do you stop paying taxes on IRA withdrawals?

Once you reach age 59½, you can withdraw money without a 10\% penalty from any type of IRA. If it is a Roth IRA and you’ve had a Roth for five years or more, you won’t owe any income tax on the withdrawal.

How much tax will I pay on my IRA withdrawal?

When you withdraw the money, both the initial investment and the gains it earned are taxed at your income tax rate in the year you withdraw it. However, if you withdraw money before you reach age 59½, you will be assessed a 10\% penalty in addition to the regular income tax based on your tax bracket.