Are Social Security benefits affected by monthly annuity payments as income?

Your annuity won't directly reduce your Social Security retirement benefit amount, but it could affect the taxation of your benefits. Up to 85% of your SS benefits may be taxable if your combined income (adjusted gross income + nontaxable interest + half of your SS benefits) exceeds certain thresholds. For individuals, that's $25,000, and for married filing jointly, it's $32,000. The only time an annuity might directly reduce your SS benefit is if it's from a job where you didn't pay Social Security taxes (like some government jobs) - then the Windfall Elimination Provision (WEP) or Government Pension Offset (GPO) could apply.

I retired 3 years ago with an annuity and SS. The annuity is definitely considered income! My social security check amount stayed the same but I was SHOCKED at tax time... had to pay in for the first time in my life!! 😡

To clarify what others have said: your monthly Social Security benefit amount won't be reduced by the annuity (assuming it's from SS-covered employment). However, the annuity is considered income for tax purposes, which means: 1. If your combined income exceeds the thresholds mentioned above, a portion of your SS benefits becomes taxable income 2. You may need to have taxes withheld from your SS benefits (use Form W-4V) 3. You might need to make quarterly estimated tax payments I'd recommend speaking with a tax professional who specializes in retirement income before you start taking benefits. Many retirees are surprised by their tax situation that first year.

MY annuity and SS benfits have been working fine together for 5 years now. The check amounts don't affect each other at all. But yes, I do pay taxes on both. I have 10% withheld from my SS check which has prevented any surprises at tax time. The SSA makes this pretty easy to set up online or by filing that W-4V form someone mentioned.

I spent weeks trying to get through to SSA about this exact question last year when I was retiring. Kept getting disconnected or waiting for hours. Finally used Claimyr.com to get a callback from SSA in under 2 hours. They have this video that shows how it works: https://youtu.be/Z-BRbJw3puU Anyway, the agent confirmed that my annuity wouldn't reduce my monthly benefit but said I should consider tax withholding to avoid a surprise bill. Setting up the withholding was pretty simple once I actually got to talk to someone.

One more thing to consider: if you're under your Full Retirement Age (FRA) and still working or receiving certain types of income, you might be subject to the Retirement Earnings Test. For 2025, if you're under FRA, $1 in benefits is withheld for every $2 you earn above $23,520. The year you reach FRA, $1 is withheld for every $3 above $62,760. However, most annuity payments aren't counted as "earnings" for this test. The earnings test typically applies to wages or self-employment income, not passive income like annuities, investments, or pensions. Once you reach your FRA, the earnings test no longer applies, and you can earn any amount without affecting your benefits.

My dad had a similar situation and ended up having to PAY BACK some of his Social Security the first year because he didn't know about the tax implications!!! The whole system is deliberately confusing to trip up seniors. Why isn't this stuff taught in school or at least explained clearly by SSA?? So frustrating!!

btw if your annuity is from a job where u didn't pay SS taxes like some gov jobs (my sister works for county) then WEP might reduce ur SS... happened to my brother in law who was a teacher in Texas... his SS was cut by almost half! check if WEP applies to u

Thanks everyone for all the helpful responses! Just to summarize what I've learned: 1. My private sector annuity won't reduce my actual SS benefit amount 2. However, it will count as income for tax purposes and might make my SS benefits taxable 3. I should consider tax withholding from my SS checks to avoid surprises 4. Since I'll be claiming at my FRA, the earnings test won't apply 5. I definitely need to consult with a tax professional before I retire This forum has been so helpful - much clearer information than I got from my financial advisor!

You've got a great summary there! One additional tip from someone who went through this transition recently - consider doing a "practice run" with your tax situation before you officially retire. You can estimate your combined income (annuity + half your projected SS benefit + any other income) and see where you'll fall tax-wise. Also, don't forget that if you have a traditional 401(k) or IRA, those withdrawals will also count toward your combined income for SS taxation purposes. It all adds up quickly! Having that tax withholding set up from the start like others mentioned is definitely the way to go. Good luck with your retirement planning - sounds like you're being smart about researching everything ahead of time!

This is exactly the kind of thorough research I wish I had done before I retired! As someone who's been dealing with both SS and annuity payments for the past few years, I can confirm everything you've learned is spot on. The taxation piece really is the biggest surprise for most people. One thing I'd add - if you're comfortable sharing your approximate combined income with your tax professional, ask them to calculate not just whether your SS will be taxable, but what your effective tax rate will be in retirement vs. what you're paying now while working. Sometimes people assume their tax burden will automatically be lower in retirement, but between the annuity, SS benefits becoming taxable, and potential 401(k) withdrawals, you might end up in a similar or even higher tax bracket than you expect. Also, keep in mind that those income thresholds for SS taxation ($25k individual, $32k married filing jointly) haven't been adjusted for inflation since the 1980s, so they catch a lot more retirees now than they were originally intended to. It's just something to be aware of when planning! Sounds like you're going to be in great shape with all this advance planning though. Congrats on your upcoming retirement!