Social Security earnings limit: Do 401k withdrawals count when collecting early retirement benefits?
I'm planning to retire next year at 63 and start collecting my Social Security retirement. I understand there's an earnings limit ($23,660 in 2025 I think?) before they reduce benefits, but I'm confused about what counts as "earnings." I'll be taking distributions from my 401k to supplement my Social Security - around $28,000/year. Do these 401k withdrawals count toward the earnings limit? My financial advisor said they don't count because they're not "earned income" but my brother insists they do and that I'll lose some benefits. Can anyone clarify this for me? I don't want to get hit with unexpected benefit reductions!
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Caden Nguyen
Your financial advisor is correct. 401k withdrawals are NOT counted as earnings for the Social Security earnings test. The earnings limit only applies to wages from employment or net earnings from self-employment. Investment income, pension payments, 401k/IRA withdrawals, annuities, and interest are all exempt from the earnings test calculation. What DOES count: wages, bonuses, commissions, self-employment income What DOESN'T count: 401k/IRA distributions, pensions, investments, rental income, etc. If you're only receiving Social Security and taking 401k withdrawals, you don't need to worry about the earnings limit at all.
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Harper Hill
•Thank you so much! That's a relief to hear. So if I did some part-time consulting work for my old company after I retire, those earnings would count toward the limit, but not my 401k money. That makes sense.
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Avery Flores
This confused me too when I retired!!! My buddy kept telling me that ALL income counts but when I called SSA they told me 401k does NOT count for earnings test. But watch out - even though 401k doesn't count toward earnings limit, your withdrawals might still be TAXABLE for determining if your SS benefits get taxed! That's totally different calculation and really confusing.
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Zoe Gonzalez
•Yes was gonna say this same thing! 401k doesn't affect earnings test but can make your SS benefits taxable if combined income is too high. IRS has different rules than Social Security earnings test.
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Ashley Adams
Wait I thought ALL income counts! When I was collecting early retirement last year they reduced my benefits because I had too much income from my rental properties and stocks. Are you sure 401K money doesn't count?
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Caden Nguyen
•The reduction in your benefits was most likely because you had wages from employment, not because of your rental or investment income. The earnings test ONLY counts wages and self-employment income. Please double-check your records - if you were working even part-time, that's what triggered the reduction. Rental income and investments never count toward the earnings test. If you believe your benefits were incorrectly reduced, you should contact SSA immediately to request a reconsideration.
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Alexis Robinson
I've spent hours trying to reach someone at Social Security to ask this exact question! Been calling for weeks now and either get disconnected or have to wait 2+ hours. How did you actually get this information from them? The website is so confusing on this topic.
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Aaron Lee
•I had the same problem with trying to reach SSA about my benefits question. I finally used Claimyr (claimyr.com) which got me through to a human at Social Security in about 20 minutes instead of hours. They have a video showing how it works: https://youtu.be/Z-BRbJw3puU For what it's worth, the agent confirmed that 401k withdrawals don't count toward the earnings test - only wages and self-employment income count.
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Alexis Robinson
•Thank you! I'll check that out. I'm so tired of getting disconnected after waiting for an hour.
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Chloe Mitchell
my sister works for SSA and she says 401k DOESNT count for earnings limit but it DOES count for something called 'combined income' which determines how much of ur SS gets taxed. totally different thing. so ur brother is probably mixing these up.
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Harper Hill
•That actually makes a lot of sense. My brother might be confusing the earnings limit with the taxation of benefits. I'll have to explain the difference to him. Thanks for this explanation!
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Zoe Gonzalez
I retired at 62 last year and had the same confusion. Don't worry - took out 35k from my 401k plus getting SS benefits and had no problem with earnings limit. But if you do ANY part-time work, even just a few hours, those earnings DO count toward limit. My neighbor got caught by this when he did some consulting and didn't report it.
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Harper Hill
•Good to know! I might do occasional consulting work, so I'll definitely keep track of that income carefully and report it to avoid any surprises.
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Avery Flores
MAKE SURE you understand the exact amount of the 2025 earnings limit though!!! It changes every year with COLA. For 2024 it's $22,320 but will probably be higher for 2025. And remember the limit is higher in the year you reach Full Retirement Age. And be super careful because if you go over they take back $1 for every $2 you earn above the limit!!!!
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Caden Nguyen
•That's correct. The 2025 earnings limit hasn't been officially announced yet since it depends on the COLA adjustment, but based on recent increases, it will likely be around $23,600-$24,000. And yes, for people reaching Full Retirement Age (FRA) in 2025, there's a higher limit that only applies during the months before you reach FRA. In 2024 that's $59,520, and will increase for 2025. Once you reach your FRA, there's no earnings limit at all.
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Aaron Lee
One important thing that no one has mentioned is that you should still be aware of Required Minimum Distributions (RMDs) for your 401k. Starting at age 73, you're required to take minimum withdrawals from traditional retirement accounts regardless of whether you need the money. Those withdrawals won't affect your Social Security earnings test, but they are taxable income and can impact how much of your Social Security benefits get taxed.
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Harper Hill
•Thanks for bringing that up. I'll need to plan for RMDs in about 10 years. I should probably talk to my financial advisor about strategies to minimize the tax impact when that time comes.
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