Will cashing out my IRA affect my Social Security benefits at 68?
I'm stuck in a dilemma and need some advice from folks who understand Social Security rules. I'm 68 years old and currently receiving my SS retirement benefits (about $1,750/month). My husband also gets his benefits and we both still work part-time to make ends meet. Here's my situation - my car just died and I need a replacement ASAP. I found a decent used car for $12,500 and I'm considering closing out a small IRA account I have (worth about $14,000) to pay cash for it instead of getting a loan at my age. What's worrying me is whether cashing out this IRA will count as income that might affect my Social Security benefits? Will this create a higher taxable income that reduces my monthly SS payment? Or does the IRA withdrawal not matter since I'm past my Full Retirement Age anyway? Really appreciate any insights from those who've navigated this before!
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Oliver Zimmermann
did the same thing last year, took 10k out for home repairs. ur SS check wont change but u might pay more taxes if it pushes u into a higher bracket. but its just for 1 year
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Amina Toure
•Thanks for sharing your experience! So my actual monthly SS deposit amount won't decrease? That's my biggest worry. I can handle a one-time tax hit if needed.
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CosmicCommander
This is an important distinction that many people miss: withdrawing from an IRA won't directly reduce your monthly Social Security benefit amount. Once you're past Full Retirement Age (which you are at 68), there's no earnings limit that would affect your benefit amount. However, the IRA withdrawal will count as income for tax purposes, which could potentially result in more of your Social Security benefits becoming taxable. If your combined income (adjusted gross income + nontaxable interest + half of your Social Security benefits) exceeds certain thresholds, up to 85% of your benefits may become taxable. Since you mentioned you and your husband both work part-time, you'll want to calculate how the additional $14,000 in income would affect your total tax situation for the year. It might be worth consulting with a tax professional before making the decision.
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Amina Toure
•This is so helpful - I was getting confused between the benefit amount and the taxation of benefits. I'll definitely look into our total combined income situation before making a final decision.
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Natasha Volkova
dont do it!!!! the govmnt will take so much in taxes its not worth it. my sister did this and lost almost half to taxes. better to get a small loan even at ur age
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CosmicCommander
•While your sister's situation sounds challenging, tax implications vary greatly depending on individual circumstances. The IRA withdrawal would be subject to ordinary income tax, but certainly not at a 50% rate for most people. Without knowing the total household income and tax bracket, it's difficult to make a blanket statement about whether a loan would be more advantageous than an IRA withdrawal.
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Javier Torres
Have you considered just taking out PART of the IRA instead of closing it completely? Maybe use $8000 from the IRA and then put the remaining $4500 on a small 2-year loan? That way you're splitting the difference and not taking such a big tax hit all at once. Just a thought from someone who's also trying to balance retirement accounts and SS benefits. This stuff gets complicated fast!
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Amina Toure
•That's actually a really smart idea I hadn't considered! Taking out just part of the IRA would reduce the tax impact while still avoiding a big loan. Thanks for the suggestion!
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Emma Davis
My husband and I were in a similar boat! We ended up taking money from our savings instead of retirement accounts because our financial advisor said the tax implications weren't worth it. But everyone's situation is different I guess. Good luck!
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Malik Johnson
You've received some good advice already, but I'd like to clarify a few technical points: 1. At 68, you're past your Full Retirement Age (FRA), so the earnings test doesn't apply - you can earn any amount from work without reducing your SS benefits. 2. However, IRA distributions count as income for determining whether your Social Security benefits are taxable. The thresholds are: - Up to 50% of benefits taxable: Combined income between $25,000-$34,000 (single) or $32,000-$44,000 (married filing jointly) - Up to 85% of benefits taxable: Combined income above $34,000 (single) or $44,000 (married filing jointly) 3. The actual AMOUNT of your monthly SS benefit won't change - just potentially how much of it is subject to income tax. 4. Since this is a one-time withdrawal, consider if this might push you into a higher tax bracket just for this year. If you're already near the top of your current bracket, spreading the withdrawal across two tax years (December and January) might reduce the overall tax impact. I'd suggest running some numbers with your specific situation before deciding.
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Amina Toure
•This is exactly the detailed explanation I needed! I think we're already in the 85% taxable range for our SS benefits, so I'll have to calculate if this pushes us into a higher overall tax bracket. The December/January split is a brilliant idea if we decide to go this route.
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Isabella Ferreira
I tried calling Social Security about a similar question last month and spent HOURS trying to get through. Eventually gave up and used this service called Claimyr (claimyr.com) that got me connected to an agent in under 10 minutes. There's a short video showing how it works: https://youtu.be/Z-BRbJw3puU The SSA agent confirmed that withdrawing from retirement accounts doesn't affect the actual SS payment amount, just potentially how it's taxed. Huge relief to hear it directly from them!
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Oliver Zimmermann
•is that service legit? hate waiting on hold foreverrr with SSA
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Isabella Ferreira
•Totally legit! Saved me hours of frustration. The SSA agent I spoke with was really helpful about my retirement account withdrawal questions.
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Javier Torres
One thing nobody mentioned - don't forget about the 10% early withdrawal penalty if you're under 59 1/2. But you're 68 so that doesn't apply to you! Just mentioning it for others reading who might be younger. The tax system is so complicated with all these different rules for different ages!
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Malik Johnson
•Good point to clarify. Yes, at 68 the OP is well past the age for early withdrawal penalties. One additional note: required minimum distributions (RMDs) begin at age 73, so eventually the OP would need to start withdrawing from the IRA anyway, though likely in smaller annual amounts than this lump sum.
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Amina Toure
Thank you all SO MUCH for the helpful advice! I feel much better understanding that: 1. My actual monthly SS benefit won't be reduced (huge relief!) 2. The withdrawal will only affect how much of my SS might be taxed 3. I should calculate the total income impact for the year I think I'm going to take the suggestion to split the difference - use about half from the IRA and finance the rest with a small loan. And maybe even split the IRA withdrawal across December/January to spread the tax impact. This community has been incredibly helpful - navigating retirement finances isn't easy!
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