Does 401K contribution count toward Social Security earnings limit when taking SS before FRA?
My wife started collecting Social Security retirement benefits last month at 65 (I know that's before her Full Retirement Age of 67). She still works part-time at a local school district and is trying to stay under the 2025 earnings limit of $23,400. Here's where I'm confused - her employer takes out about $450 per month for her 401K contribution. Does that 401K money count toward the earnings limit? Or is it just her take-home pay that counts? Her W-2 will show the full amount, but since that money goes straight to retirement, I'm wondering if the SSA looks at her gross income or something else when calculating the earnings test. Anyone know how this works?
14 comments
Join the conversation
QuantumQuasar
The earnings limit is based on your gross wages BEFORE any deductions, including 401k contributions. So yes, the 401k money counts toward the annual limit. The SSA looks at your gross earnings reported on your W-2 (Box 5 specifically) to determine if you exceeded the earnings test threshold. If your wife is going to make more than $23,400 in 2025, SSA will withhold $1 of benefits for every $2 she earns above that limit.
0 coins
Mei Wong
•Thanks for clarifying! That's what I was afraid of. So it sounds like we need to count her entire salary before any deductions. Do you know if they just reduce her monthly payment when she goes over, or do they make you pay it all back at once? She's trying to keep her hours low enough to stay under the limit.
0 coins
Liam McGuire
I think ur confusing this with tax stuff. Social Security doesnt care about retirement contributions when they look at earnings limit. They just look at what u made at ur job total. My dad tried to argue with SSA about this and lost. They take ur whole income into account not whats left after retirement savings!! Kind of a bummer
0 coins
Amara Eze
•You're absolutely right. The earnings limit for Social Security purposes is based on gross wages (or net earnings from self-employment). Pre-tax deductions like 401(k) contributions, health insurance premiums, or HSA contributions don't reduce the amount counted for the earnings test. It's important to understand this distinction to avoid unexpected benefit reductions.
0 coins
Giovanni Greco
My situation is similar! I'm also 65 and working while getting SS. Last year I went over the limit by accident and they reduced my benefits this year to make up for it. They didn't tell me until I got a letter! Now I track my earnings every month so I don't go over.
0 coins
Fatima Al-Farsi
•This happened to my neighbor too! The SSA sent her a letter saying she owed back $4200 because she went over by like $8400. They gave her payment options but it was still a shock.
0 coins
Dylan Wright
When SSA applies the earnings test, they look at gross wages before any deductions. However, there are a few things you should know: 1. Only earnings from work count - investment income, government benefits, and pension payments don't count 2. The SSA withholds benefits with a formula: $1 for every $2 earned above the annual limit 3. In the year your wife reaches FRA, the limit is higher ($62,000 in 2025) and the reduction is only $1 for every $3 earned 4. Once she reaches her FRA, there's no earnings limit If she's close to the limit, she might consider reducing her hours or seeing if she can defer some income to next year when she's closer to FRA.
0 coins
Mei Wong
•This is very helpful! So it sounds like we really need to monitor her income closely this year. Is there any grace period or warning from SSA before they start reducing benefits? Or do they just start withholding automatically when they get wage reports?
0 coins
Sofia Torres
HAS ANYONE ACTUALLY TRIED CALLING THE SSA TO ASK THESE QUESTIONS?? I spent THREE DAYS trying to get through on their 800 number last month. Kept getting disconnected or waiting for hours!!! Their website doesn't explain any of this stuff clearly. So frustrating!!
0 coins
Amara Eze
•I had the same experience trying to get through to SSA. Finally used a service called Claimyr (claimyr.com) that got me connected to an agent in about 20 minutes instead of waiting for hours. They have a video showing how it works: https://youtu.be/Z-BRbJw3puU. The agent I spoke with confirmed that 401(k) contributions are indeed counted toward the earnings limit since they're still considered part of your gross wages.
0 coins
Fatima Al-Farsi
my sister works at H&R Block and she said 401k definitely counts in the earnings test. you could try working less hours in december if your wife is getting close to the limit. thats what my husband did.
0 coins
Mei Wong
•Thanks for the advice! Maybe I can suggest she take some unpaid time off in December if she's getting close to the limit. I appreciate everyone's help with this.
0 coins
Dylan Wright
One additional thing to keep in mind - the SSA does recalculate your benefit amount when you reach Full Retirement Age to give you credit for the months they withheld benefits due to the earnings test. So while your wife may see reduced benefits now if she exceeds the earnings limit, her benefit amount will increase at FRA to account for those reductions. Many people don't realize this adjustment happens automatically.
0 coins
Giovanni Greco
•Wait really??? I didn't know they adjust it later! I thought that money was just gone forever. That makes me feel better about working more hours.
0 coins