Taxable income for Social Security retirement

[SueGhel]

Hello,

In January of this year, I took a one-time distribution payment from my Fidelity retirement account. 
In February, I started receiving Social Security early retirement benefits. Will the January withdrawal from my Fidelity account be assessed as annual income for Social Security additional income allowances, or will it not count since my Social Security retirement benefits started after the withdrawal date?

thanks,

Sue

[BettieG]

Hi @SueGhel!  Great question!  Happy to help!

I'm assuming, for purposes of this response, that the distribution/withdrawal from your Fidelity account in January will be taxable as income to you (i.e., it wasn't a distribution from a Roth IRA or Roth 401(k)).  Assuming that's the case, then the withdrawn amount will be included in your total income for purposes of calculating any tax you might owe on your social security benefits, which you started taking in the same tax year.  It doesn't matter that you began taking social security after you took your Fidelity distribution as long as both occurred in the same year.

Here's an article about how and whether social security income is taxable.  In short, it depends on your total income, which would include the Fidelity distribution. 

I hope this helps!

[carmen_t · Accepted solution]

Hello and thank you for your question.  Based on the IRS article below from the social security website the Fidelity one-time distribution will not be counted to your social security earnings record.  Only earned income is.  Some items to consider is the distribution and social security benefits will have taxable income considerations so I will also include a tax calculator.

Tax Calculator 

Social Security Link 

[GuodaL]

Hi Sue,

That is a good question. 

If you have funds in a pretax plan, such as a 401(k) or funds in an employer-funded pension, withdrawals you make from these plans after you retire are generally subject to income tax. You can usually have the plan administrator deduct taxes from your distributions — but, depending on your tax bracket, it may not be enough to cover your bill.

Ultimately, your tax rate is based on all your taxable income during the whole year. If you have multiple sources of retirement income, you'll save on your taxes in retirement if you limit distributions from pretax plans to only the amounts you need or are required to withdraw.

Please take a look at this website for more tax tips for after you retire.

https://turbotax.intuit.com/tax-tips/retirement/tax-tips-after-you-retire/L6DBVFZ25 

Hope this answers your question. Feel free to respond if you have any additional questions.

[bigo1]

Hi @SueGhel thank you for joining us today for our TurboTax Live Event.  

The 2023 distribution from your retirement account is not considered earnings for Social Security (SS) purposes.  This means that pension payments, annuities, and the interest or dividends from your savings and investments are not taxed as SS earnings.   You may need to pay regular income tax, but you do not pay Social Security taxes.  Below are useful tools to estimate your 2023 Individual income tax and determine your tax brackets for 2023:

TurboTax's TaxCaster tax calculator:

https://turbotax.intuit.com/tax-tools/

2022 and 2023 Tax Brackets:

https://turbotax.intuit.com/tax-tips/irs-tax-return/current-federal-tax-rate-schedules/L7Bjs1EAD

Please reach out if you have additional questions.

Thanks for using TTLive!

Bonnie, TTLive Tax Expert