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Do 401(k) Withdrawals Count as “Earnings” to Social Security?
Anyone who claims their Social Security before reaching full retirement age is subject to Social Security’s so-called “earnings test” which limits how much you can earn before they take back some of your benefits. But people are often confused about what Social Security actually means by “earnings.” In this article by Karin Price Mueller appearing at New Jersey’s NJ.com, the author responds to a question about whether individual withdrawals from tax-advantaged 401(k) savings will count toward Social Security’s earnings limit, thus impacting Social Security benefits. Click here to read more.
Also, if you’re unsure about your individual situation under Social Security or have questions about your personal benefit entitlements, note that the AMAC Foundation provides an independent free-to-the-public Social Security Advisory service to help Americans navigate the complexities of this program. Learn more about it here…
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401k withdrawals count as ordinary income for income tax purposes, but do not count as earnings for the purposes of Social Security’s “earnings test” - only earnings from working count towards Social Security’s annual earnings limit. Passive income earned from other sources such as investments, 401k withdrawals, interest, etc., do not count toward Social Security’s earnings test, which applies to everyone who works while collecting SS benefits before reaching their full retirement age.
Russell Gloor
National Social Security Advisor
The AMAC Foundation
Yes, distributions from a 401k account are included as ordinary income in your adjusted gross income and are therefore subject to federal income tax. For those filing for benefits before their full retirement age, however, such distributions are not considered in the earnings limit test.
No, withdrawals from your 401(k) account do not count as earnings for Social Security’s earnings test (for those who are collecting benefits before their full retirement age). But 401(k) withdrawals do count as income when determining if you pay income tax on your Social Security benefits.
Russell Gloor
National Social Security Advisor
The AMAC Foundation
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AMAC Foundation, Inc.