I plan to retire at age 55, next year. I want to live on my IRA distribution and at 62 take early social security. ( I realize I can take a fixed monthly amount prior to age 59.5, as long as I take it for 5 years).

I read that social security wages are limited until complete retirement, which for me is 66.5.

My question is: During the years when I am 62 - 66.5, does my IRA distribution count as social security wages?

Thank You!

s_cianci

Were your contributions to your IRA pre-tax or post-tax? If they were pre-tax (i.e. tax sheltered), then the distributions will count as "income" and carry the appropriate tax liability. But if the deposits were not tax-sheltered, then no, since you would have already paid the applicable tax at the time your earned the money, prior to depositing it in your IRA. Of course, any interest your IRA accrues is "income" and will be taxed accordingly. Retiring early, such as at age 55, and making withdrawals at that time, will carry a heavier tax liability than if you wait until you're older.

AtlantaTaxExpert

To answer your question, regardless of whether the IRA was traditional (pre-tax) or Roth (post-tax) in terms of the contribution, the Social Security taxes were already paid, so the distribution from the IRS is NOT subject to Social Security or Medicare taxes.

ebaines

Hello Shengels. I assume you are asking whether your IRA withdrawal will cause a decrease in your SS payout, like earned income does - is that right? The answer is "no" - IRA withdrawals are not considered to be earned income wages, and hence do not limit your SS payout. Also, if you are asking whether you have to pay SS tax on the IRA withdrawal - again the answer is "no." Of course you will have some income tax liability, but I suspect that you already knew that.

AtlantaTaxExpert

ebaines:

Good catch on the SS payout offset issue; I did not consider that.