Does my 401k withdrawal count as income for Social Security earnings limit?

Your financial advisor is correct. 401k withdrawals are NOT counted as earnings for the Social Security earnings test. The earnings test only counts wages from employment or net earnings from self-employment. Unearned income like 401k withdrawals, pension payments, investment income, interest, and dividends don't count toward the earnings limit. However, your 401k withdrawals will still count as income for determining whether your Social Security benefits are taxable. If your combined income (adjusted gross income + nontaxable interest + half of your SS benefits) exceeds certain thresholds, up to 85% of your benefits may be taxable.

I was in a similar situation last year and can confirm 401k withdrawals DON'T affect the earnings test. But watch out for the tax situation - I ended up owing more than I expected because my 401k withdrawal pushed more of my SS benefits into taxable territory. Also, if you're having trouble getting clear answers from Social Security on stuff like this, try Claimyr (claimyr.com). I kept getting disconnected when calling SSA directly, but Claimyr got me through to a real person in about 20 minutes. You can see how it works in their video: https://youtu.be/Z-BRbJw3puU

Your brother in law is probably confused about the difference between the earnings test and TAXATION of benefits. Two totally different things!!

BEWARE!!! The SSA people themselves often give WRONG information about this!!! When I called last year the first agent told me 401k withdrawals would count against my earnings limit but that was COMPLETELY WRONG!!! I had to call back and talk to a supervisor who confirmed it DOESN'T count. These rules are so confusing and even their own employees mess them up sometimes. ALWAYS get a second opinion!!!

Let me add some clarity here with the official rules: 1. Earnings test only counts: - Wages from employment (W-2 income) - Net earnings from self-employment 2. The following do NOT count toward earnings test: - 401k/IRA withdrawals - Pension payments - Annuities - Investment income/dividends/interest - Lottery/gambling winnings - Capital gains - Rental income (if you're not a real estate professional) Your brother-in-law is likely confusing the earnings test with the taxation of benefits, or he had other income from working that triggered the reduction. The earnings limit for 2025 if you're under FRA the entire year is indeed $22,320 (with $1 reduction for every $2 over that limit).

My neighbor had this exact problem last year! He took out some 401k money and then got worried about his SS. But turns out it was fine for his benefits but he did have to pay more taxes that year. Just make sure u have enough withheld so u dont get surprised at tax time!!

I think ppl get confused cause theres like two different issues - the earnings test which is about working while on ss and then the tax thing where ur benefits might be taxed... i made that mistake too at first

Thanks everyone for the great information! This community is so helpful. So to summarize what I've learned: 1. My 401k withdrawal will NOT count toward the earnings limit 2. It WILL potentially make more of my SS benefits taxable 3. I should consider having taxes withheld from the 401k withdrawal to avoid a surprise tax bill I really appreciate all your help!