[ASP0487]

I plan on retiring at the end of the year and I will be 63 years old. I plan on making a $1000 per month withdraw from my 401 to help offset my social security payments. I know the withdraws are subject to federal and state taxes, but are they subject to medicare taxes? I know they should be free from social security taxes that are based on wages.

[ebaines]

No - 401(k) and IRA withdrawals are not subject to medicare or FICA taxes. You may not realize it but you actually paid medicare and FICA on your 401(K) contributions when you were employed. And so far at least we do not pay these taxes on investment income. However, come 2013 under Obamacare we will start having to pay Medicare on investment income if your AGI exceeds $250K - but I have not heard specifically whether that will apply to the tax-deferred earnings in a 401(k) or IRA.

**EDIT** Here's a site that says that income from qualified retirement plans (such as a 401(k) or IRA) will NOT be subject to the new 3.8% Medicare tax: http://www.nixonpeabody.com/services...ID=3252&SID=53