If you will reach your full retirement age (67 for people born in 1960 or later) after 2025, you can earn as much as $23,400 with no effect on your benefits. Beyond that threshold, $1 will be withheld for every $2 in additional earnings.
There are more details to know about the earnings test. However, for our purposes, the important point is that IRA distributions do not count as earned income. The Social Security earnings test only considers money you earn from a job or that you get from a business you own or actively participate in.
Situation 2: IRA income can result in some of your Social Security benefits getting taxed
Depending on your income, some of your Social Security benefits can be subject to federal income tax. To determine this, the IRS uses a figure known as your combined income.
Your combined income is equal to:
- Your adjusted gross income (AGI)
- Any nontaxable interest income, such as from municipal bonds
- Half of your Social Security benefits.