Roth IRA and 401K

[ri-solano]

Hi - two questions:

1-i have a roth IRA which i opened last year at 60 year-old, how long do i have to wait to make withdrawals without penalty or without the condition that i have to pay the amount withdrew back? Are these withdrawals taxed or tax-free?

2-will any withdrawals from my 401k be added to any social security benefits received and both taxed?

[evelynm]

You can take a Roth IRA distribution on your contributions at any time without penalty or taxes. If you wish to withdraw your Roth IRA earnings, however, there are certain circumstances where there are no taxes or penalties: You already met the age test: age 59.5 or older, plus Your Roth IRA account must be active for five years or more.

Roth distributions do not count as income for Social Security because they are not taxable and therefore will not cause Social Security benefits to be taxable.

401k withdrawals count as taxable income for Social Security because contributions to your 401(k) are made with compensation received from employment.   However: you have already paid Social Security taxes on that income.   You will owe income tax on 401(k) distributions when you take them, but not any Social Security tax.

[AR_CPA2]

Hi ri-solano, 

Great question!

1.  You may withdraw the principal you  contribute at any time, since you're already 59 1/2 years of age.  For Roth IRA, there is no RMD requirements.  Roth IRAs do not require withdrawals until after the death of the owner.

Additional info:

https://www.irs.gov/retirement-plans/roth-iras

https://www.irs.gov/retirement-plans/traditional-and-roth-iras

https://www.irs.gov/retirement-plans/retirement-plan-and-ira-required-minimum-distributions-faqs#:~:...

2.  Any withdrawals from your 401K and any other taxable income is used to determine your taxable amount of Social Security Benefits.  Up to 85% of your Social Security Benefits could be taxable depending on your other income. 

https://www.ssa.gov/benefits/retirement/planner/taxes.html

Hope it helps.

[ri-solano]

Thank you evelynm! just one quick follow up question. i am a bit confused with the sentence below regarding not any social security tax. my question is once i retire and start collecting social security do i get taxed on those amounts? i don;t believe i am paying taxes on social security via my paycheck, right? 

You will owe income tax on 401(k) distributions when you take them, but not any Social Security tax.

[evelynm]

You will only have regular Federal income tax on your 401K distributions if applicable.    Social Security taxes would have been paid when you received your employment compensation.