Do 401(k) and IRA Distributions Count Toward the Social Security Earnings Limit?

Withdrawals from a 401(k), individual retirement account (IRA) or other retirement savings plan do not apply to Social Security’s earnings limit (also known as the earnings test), which can reduce monthly payments for some beneficiaries who continue to work after claiming benefits.

These distributions don’t apply because, when it comes to the earnings limit, the Social Security Administration (SSA) only counts earned income, which it defines as gross wages from a job or net earnings from self-employment. Income from your retirement savings is excluded.

Numerous other types of nonwork income, such as pensions, annuities, and interest and dividends from savings and investments, also do not count. The Social Security Handbook, an online guide to the program published by the SSA, has a full list.

How does the earnings limit work?

The earnings limit only applies if you start Social Security benefits before reaching full retirement age (FRA), the age when you qualify to collect 100 percent of the benefit amount calculated from your lifetime earnings history.

If you do collect benefits before full retirement age and continue to work, Social Security will temporarily withhold a portion of your benefits if you exceed the annual earnings limit.

In 2025, the limit is $23,400 for those who are collecting Social Security and will not reach FRA during the year. Social Security will deduct $1 in benefits for every $2 in earnings above that amount. If you will reach FRA in 2025, the cap is higher ($62,160) and the deduction lower ($1 for every $3 in income over the cap). When you pass the milestone, Social Security adjusts your benefit so that over time, you recoup the amount withheld.

Keep in mind

• Contributions to your IRA or 401(k) cannot be deducted from income for purposes of the earnings test. Social Security uses your gross income before tax-deferred allotments to determine your earnings.
• Income from all sources does go into determining whether and what portion of your Social Security benefits are taxable.