Benefits Planner: Retirement | What Income is Included in your Social Security Record? (2024)

FAQs

Benefits Planner: Retirement | What Income is Included in your Social Security Record? ›

What Income Is Included in Your Social Security Record? (En español) Only earned income, your wages, or net income from self-employment is covered by Social Security. If money was withheld from your wages for “Social Security” or “FICA,” your wages are covered by Social Security.

Will withdrawals from my individual retirement account affect my Social Security benefits? Social Security does not count pension payments, annuities, or the interest or dividends from your savings and investments as earnings. They do not lower your Social Security retirement benefits.

When you receive income from your traditional 401(k), 403(b) or 457 salary reduction plans, you'll owe income tax on those amounts. This income, which is produced by the combination of your contributions, any employer contributions and earnings on the contributions, is taxed at your regular ordinary rate.

Social Security is part of the retirement plan for almost every American worker. It provides replacement income for qualified retirees and their families. This section of our website helps you better understand the program, the application process, and the online tools and resources available to you.

Income is considered wages from an employer and does NOT include investment earnings, government benefits, interest or capital gains.

For the earnings limits, we don't count income such as other government benefits, investment earnings, interest, pensions, annuities, and capital gains.

For the year you are filing, earned income includes all income from employment, but only if it is includable in gross income. Examples of earned income are: wages; salaries; tips; and other taxable employee compensation. Earned income also includes net earnings from self-employment.

"A Roth IRA or Roth 401(k) can help you save on taxes in retirement. Not only are withdrawals potentially tax-free,² they won't impact the taxation of your Social Security benefit.

Your Social Security benefit might be reduced if you get a pension from an employer who wasn't required to withhold Social Security taxes. This reduction is called the “Windfall Elimination Provision” (WEP). It most commonly affects government work or work in other countries.

Social Security benefit taxes are based on what the Social Security Administration (SSA) refers to as your “combined” income. That consists of your adjusted gross income, plus any nontaxable interest you earned (and certain other items) and half of your Social Security income.

At what age is Social Security no longer taxed? ›

Social Security tax FAQs

Social Security income can be taxable no matter how old you are. It all depends on whether your total combined income exceeds a certain level set for your filing status. You may have heard that Social Security income is not taxed after age 70; this is false.

You can retire with Social Security and a pension at the same time, but the Social Security Administration (SSA) might reduce your Social Security benefit if your pension is from a job at which you did not pay Social Security taxes on your wages. There are two different kinds of pensions: covered and noncovered.

What is the difference between a 401(k) and a pension? A 401(k) is an employer-sponsored retirement account that allows an employee to divert a percentage of his or her salary—either pre- or post-tax—to the account. A traditional pension plan offers retirees a fixed monthly benefit for the rest of their lives.

Only earned income, your wages, or net income from self-employment is covered by Social Security. If money was withheld from your wages for “Social Security” or “FICA,” your wages are covered by Social Security.

Nontaxable income won't be taxed, whether or not you enter it on your tax return. The following items are deemed nontaxable by the IRS: Inheritances, gifts and bequests. Cash rebates on items you purchase from a retailer, manufacturer or dealer.

Wages are the same for SSI purposes as for the social security retirement program's earnings test. ( See § 404.429(c) of this chapter.) Wages include salaries, commissions, bonuses, severance pay, and any other special payments received because of your employment.

Your Social Security benefit might be reduced if you get a pension from an employer who wasn't required to withhold Social Security taxes. This reduction is called the “Windfall Elimination Provision” (WEP). It most commonly affects government work or work in other countries.

Can you collect Social Security and a pension at the same time? You can retire with Social Security and a pension at the same time, but the Social Security Administration (SSA) might reduce your Social Security benefit if your pension is from a job at which you did not pay Social Security taxes on your wages.

Social Security benefits are typically computed using "average indexed monthly earnings." This average summarizes up to 35 years of a worker's indexed earnings. We apply a formula to this average to compute the primary insurance amount (PIA). The PIA is the basis for the benefits that are paid to an individual.