Do 401k Withdrawals Count as Income Against Social Security?
401(k) withdrawals won't reduce your Social Security payments, but they can affect how your benefits are taxed. Understand the key financial distinctions.
Many Americans rely on both 401(k) savings and Social Security benefits for retirement. A 401(k) is a workplace retirement plan with tax-deferred growth, while Social Security provides income based on lifetime earnings. A common question is whether 401(k) distributions can negatively impact Social Security benefits. The answer depends on the specific type of Social Security benefit in question.
Impact on Social Security Retirement Benefits
Social Security retirement benefits are based on your highest 35 years of earnings. If you are under your full retirement age (FRA), your benefits can be temporarily reduced by the earnings test. This test applies to income earned from work. For 2025, if you are under FRA for the entire year, your benefits are reduced by $1 for every $2 you earn above $23,400.
The earnings test applies only to earned income, such as wages or net earnings from self-employment. It does not apply to other income like pensions, investments, or distributions from retirement accounts. Because withdrawals from a 401(k) are not considered earned income, they will not cause a reduction in your monthly Social Security retirement benefit.
The earnings test no longer applies once you reach your full retirement age. In the year you reach FRA, a higher limit of $62,160 applies to the months before your birthday, with a reduction of $1 for every $3 earned above that amount. Any benefits withheld are not permanently lost, as your monthly payment is recalculated at your FRA to credit you for those months.
Effect on the Taxation of Your Social Security Benefits
While 401(k) withdrawals do not reduce your monthly Social Security payment, they can cause your benefits to become subject to federal income tax. The IRS determines this using a figure called “combined income.” This is calculated by taking your adjusted gross income (AGI), adding any nontaxable interest, and then adding 50% of your Social Security benefits for the year.
Distributions from a traditional, pre-tax 401(k) are included in your AGI. This increase can push your combined income over certain thresholds, causing a portion of your Social Security benefits to become taxable. For individual filers, up to 50% of benefits may be taxable with a combined income between $25,000 and $34,000. If income exceeds $34,000, up to 85% of benefits may be taxable.
For joint filers, up to 50% of benefits are taxable for combined incomes between $32,000 and $44,000, and up to 85% for incomes above $44,000. For example, a married couple with $20,000 in Social Security benefits and no other income would pay no tax on their benefits. If they withdraw $30,000 from a traditional 401(k), their combined income becomes $40,000, potentially making half their benefits taxable. Qualified distributions from a Roth 401(k) are not included in AGI and do not increase your combined income.
Distinctions for SSI and SSDI Programs
The rules for how 401(k)s affect Social Security benefits differ for need-based and disability programs like Supplemental Security Income (SSI) and Social Security Disability Insurance (SSDI). These programs have distinct purposes and eligibility criteria compared to retirement benefits.
Supplemental Security Income
Supplemental Security Income (SSI) is a federal program providing payments to adults and children with a disability or blindness who have income and resources below specific limits. SSI is not based on prior work history, so both income and assets are strictly limited. A 401(k) account is considered a “countable resource” by the Social Security Administration.
To be eligible for SSI, an individual’s countable resources cannot exceed $2,000, and for a couple, the limit is $3,000. A 401(k) balance often exceeds this threshold, which can make a person ineligible for SSI. Any withdrawal from a 401(k) is considered unearned income for the month received and will reduce the SSI payment on a nearly dollar-for-dollar basis after a small exclusion.
Social Security Disability Insurance
Social Security Disability Insurance (SSDI) provides income to people who cannot work due to a disability and have a sufficient work history. Eligibility is determined by your inability to engage in Substantial Gainful Activity (SGA), which is measured by your work earnings. For 2025, the SGA limit for non-blind individuals is $1,620 per month.
Similar to the retirement earnings test, the SGA limit only considers earned income from work, not unearned income like 401(k) withdrawals. Therefore, taking a distribution from a 401(k) does not count toward the SGA limit and will not affect your SSDI eligibility or benefit amount. A 401(k) withdrawal is taxable income, however, and can cause a portion of your SSDI benefits to become taxable under the same combined income rules.