Do 401k withdrawals count toward Social Security earnings limit after retirement?

Good news! 401k withdrawals do NOT count toward the Social Security earnings limit. The earnings test only applies to wages from actual work or self-employment income. Pension payments, 401k distributions, IRA withdrawals, investment income, and interest are all excluded from the earnings test calculation. So you can withdraw from your 401k without worrying about it affecting your Social Security benefits. The only income that matters for the earnings test is money you actively earn by working.

my uncle had this same question last yr. he took out like 60 grand from his 401k after retiring and it didnt effect his ss at all. but watch out for taxes!! they can be brutal when u take big distributions

CAREFUL! While 401k withdrawals don't count toward the earnings test, they absolutely CAN increase how much of your Social Security is taxed! Up to 85% of your SS benefits can become taxable depending on your combined income. My husband and I learned this the hard way last year when our tax bill shocked us. You need to look at "combined income" which is your adjusted gross income + nontaxable interest + 1/2 of SS benefits. If that exceeds $25,000 (single) or $32,000 (married), your benefits start getting taxed!!!

When I retired in 2023, I called Social Security EIGHT TIMES to get a straight answer about this! No one could tell me for sure and I kept getting different answers from different agents. Typical government confusion!!! One agent even told me stock dividends would count against the earnings limit which is COMPLETELY WRONG. It was a nightmare trying to get accurate information.

Congrtulations on approaching retirement! My wife and I just went through this last year.

One other important consideration - if you're planning to take 401k distributions before age 65, remember that Medicare premiums can be affected by higher income too (IRMAA surcharges). Sometimes it's better to live off other savings first and delay larger 401k withdrawals until you've worked out a strategy that minimizes both taxation of Social Security benefits and Medicare premium increases. A good financial advisor who specializes in retirement income planning can help you sequence your withdrawals optimally.

my sister works for SSA and she says ppl confuse this ALL THE TIME. she says remeber: earnings = money u EARN by WORKING. thats it. good luck with retiring!!

Since we're discussing this topic - does anyone know if Roth IRA withdrawals affect the taxation of Social Security benefits? I've heard conflicting information and am trying to plan my own retirement withdrawals for next year.

Thanks everyone for the helpful responses! Just to summarize what I've learned: 1. 401k withdrawals do NOT count toward the earnings limit test (which is what I was originally worried about) 2. BUT 401k withdrawals CAN increase how much of my Social Security gets taxed 3. AND large withdrawals might increase my future Medicare premiums I definitely need to meet with both my financial advisor and tax person to create a better withdrawal strategy. This is much more complicated than I realized!

This is such a valuable discussion! I'm also approaching retirement and had similar concerns about 401k withdrawals affecting my Social Security. Reading through all these responses has been incredibly educational. One thing I'd add is that it might be worth considering doing some Roth conversions before you start taking Social Security if you have traditional 401k funds. Since Roth withdrawals don't count toward the combined income calculation (as Andre mentioned), converting some of your traditional 401k to Roth now while you're still working could give you more tax-free income options later. Of course, you'd pay taxes on the conversion, but it might be worth running the numbers with your advisor. Thanks to everyone for sharing their experiences and knowledge!

This thread has been incredibly helpful! I'm 61 and was planning to retire at 62, but now I'm wondering if I should wait until full retirement age to avoid the earnings test altogether. For those who retired early and dealt with the earnings limit - was it worth it to start collecting early even with the restrictions? I'm torn between wanting to enjoy retirement sooner versus maximizing my benefits by waiting. My 401k is similar to Ethan's situation, so knowing that withdrawals don't count toward the earnings test is reassuring, but I'm still nervous about making the wrong decision on timing.

As someone who actually made this decision 3 years ago at 62, I can share my experience. I took early Social Security despite the earnings test because I wanted the guaranteed income stream, even though it was reduced. The key was having a solid plan for my other income sources. Since 401k withdrawals don't count toward the earnings limit (as confirmed by everyone here), I was able to supplement my reduced SS benefits with strategic 401k distributions. Yes, I'm getting less SS than if I had waited, but I've had 3 years of retirement that I absolutely don't regret. My advice: calculate your total retirement income needs, factor in healthcare costs until Medicare kicks in, and remember that nothing is guaranteed - having some income now versus potentially more later was worth it for me. But everyone's situation is different! The peace of mind from having that SS check coming in every month, even if smaller, has been valuable.