My wife is on Social Security and has been since 2001. At the time that she left her employer she had a loan of about $15,000 from her employer. The following year they just deducted it from her 401K account and never gave her the opportunity to repay it. Because of all her health problems she never returned to work. She has collected monies from Social SEcurity and her Long Term Disability Insurer which pays up to 65% of her salary at the time of her disability. Now social security is writing and inquiring into her claimed income over the years. She never returned to work, but did have this loan deducted from her 401K and added to her income for 2002. She also took a hardship withdrawl another year to pay for our daughter's college tuition. What will happen to her Social Security because of these withdrawals? All earnings were previous to her departure from work, and we were told by a tax accountant that she would not be penalized because she was totally disabled. Please advise because there is NO way she can return to work and if we lose her social security income, we will really have some financial problems. Elmer

If you receive "substantial" income your disability benefits will be terminated. $15,000.00 would exceed that threshold. The $15,000.00 would have been income in the year it was deducted from your 401k. It is quite possible that you would not be eligible for disability benefits that year.

I suggest you go to the SSA office and explain what took place. Hopefully, they will not stop your benefits. If they do, you will be able to restart them. They may be able to do it retroactively. But in my opinion you need to visit the SSA and discuss the issue in person.