Social Security: Will IRA Withdrawals Threaten Your Benefits?

Social Security is a key part of your financial security in retirement, but many people are also fortunate enough to have retirement accounts like IRAs that they can draw from. However, many people fear that taking money out of an IRA jeopardizes your Social Security benefits.

In the following video, Dan Caplinger, The Motley Fool's director of investment planning, goes through the things retirees have to watch out for when considering withdrawing money from their IRAs. On one hand, Dan notes that there's no provision that forces you to forfeit Social Security benefits based on IRA withdrawals, even if you take Social Security early. The only forfeiture provision applies to wage and salary income, not IRA income. Yet Dan also points out that under some circumstances, Social Security benefits can be subject to taxation, and withdrawals from a traditional IRA can boost the income the IRS takes into account in calculating taxes on your benefits. As a result, Dan concludes that it's smart to coordinate your retirement account withdrawals to make sure that you minimize your taxes.

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Read/Post Comments (11) | Recommend This Article (45)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 25, 2014, at 2:53 PM, JosephBDFW wrote:

    Doesn't it also raise your Medicare Part B premium?

  • Report this Comment On January 25, 2014, at 3:00 PM, jeanieb wrote:

    When I took funds from my IRA, I was not aware that what I took out was over the allowable amount without affecting my SS, and that it would be added as income which caused my taxes to increase tremendously. Also because of this, my SS was decreased by $500 which would remain in place until the next year. Did everybody, except me, know this?

  • Report this Comment On January 25, 2014, at 3:02 PM, jeanieb wrote:

    Yes it did. I could accept that better than taking that much from my SS.

  • Report this Comment On January 25, 2014, at 4:43 PM, ugo wrote:

    Anyone see the WSJ article about seniors being secretly rich?

  • Report this Comment On January 25, 2014, at 7:29 PM, mark1968 wrote:

    @jeanieb, someway you made a mistake. IRA's aren't earned income and CAN'T cause your SS to be reduced. Check with the SS office as it seems you reported the income as Earned Income.

  • Report this Comment On January 25, 2014, at 10:07 PM, TheAncient wrote:

    This is why I dumped or moved all my IRAs to other funds before I retired.

  • Report this Comment On January 26, 2014, at 10:02 AM, bella66 wrote:

    But, when you have retirement income from companies that you worked for then your SS is adjusted down. Also, inherited monies from IRA's and 401'Ks can cause a decrease in your SS income. I know, as my income from SS dropped by $200 monthly because I worked and have saved and have additional sources. Sorry, but the government is always looking at ways to get at the monies of the middle class.

  • Report this Comment On January 26, 2014, at 11:15 AM, LadyMantle wrote:

    Is there a way of taking a small monthly distribution from an IRA to supplement SS? How is this set up with the banks?

    Even though IRAs are tax deferred and you pay income tax on it when you take distributions, they are not considered "earned income" that would be subject to an "earnings limit." That is my understanding. Anyone beg to differ?

  • Report this Comment On January 27, 2014, at 9:22 AM, fnurl wrote:

    When you use the worksheet to calculate if any of your SS benefits are taxable, line 3 instructs you to "combine lines 7, 8a, 9a, 10 through 14, 15b, 16b, 17 through 19, and 21" if you are using form 1040 or, lines 7, 8a, 9a,10, 11b, 12b and 13 if using form 1040A. Line 16b on 1040 (not sure which line on 1040b) is an IRA distribution so it definitely comes into play when calculating taxable amount. The more you withdraw from your IRA, the more of your SS benefits are subject to tax. If you withdraw a big chunk out of your IRA, it's possible that all of your SS benefits could be taxable. Also, watch out for line 21 - that's gambling winnings. If you even win $1000 on the lottery, that comes right off of your SS benefits.

  • Report this Comment On October 05, 2014, at 12:23 PM, TBRich65 wrote:

    I received SS in the amount of 24K and pension in the amount of 12K; I want to take out 10-12K from an IRA for vacation in 2015. I was penalized and taxed for taking money out of this IRA account 2 years ago. Why?

  • Report this Comment On April 15, 2015, at 2:33 PM, jacquelineMyers wrote:

    Since you are required to take a specific amount from your RMD why is this considered earned income and reduces my social security benefit I pay taxes on the RMD when it is withdrawn

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Dan Caplinger

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

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