Traditional IRA withdrawals increase your Adjusted Gross Income (AGI), which can make up to 85% of your Social Security benefits taxable. While IRA withdrawals do not reduce your monthly benefit amount and are not considered "earned income" for the earnings test, they raise your combined income, potentially triggering higher taxes.
If you'll reach full retirement age in 2026, you can earn up to $65,160. After that, Social Security will withhold $1 for every $3 of earnings. There are more details to know about the earnings test. However, for our purposes, the important point is that IRA distributions do not count as earned income.
Social Security does not count pension payments, annuities, or the interest or dividends from your savings and investments as earnings. They do not lower your Social Security retirement benefits.
Center for Investor Education
Income from your assets whether through IRA withdrawals or by dividends, interest and capital gains from non-IRA assets can make your social security taxable or increase your Medicare premiums.
Despite what you may have heard, the Social Security Administration does not count IRA distributions as earned income when determining Social Security payments. The same goes for pension payments, annuities or interests and dividends from savings and investments.
To avoid a tax penalty, you need to begin withdrawing Required Minimum Distributions (RMDs) from your IRA and retirement plan accounts annually, starting at age 73. If you miss a withdrawal, you may owe 25% of the amount that was supposed to be withdrawn.
For simplicity's sake, let's assume a hypothetical investor has one IRA with an account balance of $100,000 as of December 31 of the prior year. To calculate the RMD the year they turn 73, they would use a life expectancy factor of 26.5. So the RMD would be $100,000 ÷ 26.5, or $3,773.58.
To avoid taxes on IRA withdrawals, use a Roth IRA (contributions are after-tax, qualified withdrawals are tax-free), use Qualified Charitable Distributions (QCDs) to donate directly to charity from your IRA (for those over 70.5), or use exceptions to the 10% early withdrawal penalty, such as for first-time home purchases or certain higher education costs, though traditional IRA withdrawals are generally taxed as income after 59½.
The $1,000 a month rule is a retirement guideline suggesting you need about $240,000 saved for every $1,000 per month in desired income, based on a 5% annual withdrawal rate (5% of $240k is $12k/year, or $1k/month). It's a simple way to set savings goals, but it doesn't account for inflation, taxes, or other income like Social Security, so it's best used as a starting point, not a complete plan.
The #1 regret of retirees is not saving enough money, with studies showing a large majority wish they had saved more and started earlier, leading to financial stress and limitations in their desired lifestyle. Other major regrets often center around a lack of planning for time, health, and experiences, such as working too long, putting off travel, or not planning for future healthcare costs, says financial experts and financial planning sources.
Can You Contribute to Your IRA if You Are on Social Security? You may be able to make IRA contributions after retirement if you are on Social Security, but only if you also earn taxable compensation. Social Security benefits don't count as earned income and can't be used for an IRA contribution.
Roughly 7% to 9% of American households have $500,000 or more in retirement savings, though figures vary slightly by source, with data from late 2025 suggesting around 7.2% and older 2022 data indicating about 9%, showing it's a significant milestone achieved by less than one in ten families, despite higher averages driven by wealthy individuals.
The "7 withdrawal rule" in retirement planning suggests taking out 7% of your savings in the first year, then adjusting for inflation annually, offering more income early but with higher risk than the traditional 4% rule, being potentially better for shorter retirements or risk-tolerant individuals who want more spending power upfront, though it's less sustainable long-term for a standard 30-year retirement. It's a guideline, not a guarantee, and its success depends heavily on market performance, individual health, and lifestyle, with some financial experts recommending more conservative rates or adjusting based on personal needs.
Your Required Minimum Distribution (RMD) on $500k depends on your age, using the prior year's Dec 31 balance divided by an IRS life expectancy factor, e.g., at age 73 (factor 26.5), the RMD is ~$18,868, while at age 74 (factor 25.5), it's ~$19,608, with factors decreasing and RMDs increasing as you age, using tables from IRS Publication 590-B.
Working and earning significant income before your full retirement age (FRA) can reduce Social Security benefits, with $1 deducted for every $2 over the annual limit (e.g., $24,480 in 2026); in the year you reach FRA, it's $1 for every $3 over a higher limit ($65,160 for 2026) until the month you hit FRA, after which earnings don't matter, and counts wages, self-employment net earnings, bonuses, and commissions, but not pensions or investments.
The "Social Security 50% Rule" refers to the maximum spousal benefit, where a spouse can receive up to 50% of the primary earner's full Social Security retirement benefit, but only if they wait until their own Full Retirement Age (FRA) (FRA) to claim, otherwise it's reduced, with a potential future reduction in the percentage to 33% by 2042 under current proposals. This spousal benefit is paid if it's higher than the spouse's own earned benefit, and claiming early for the primary earner doesn't reduce the potential 50% spousal benefit amount if the spouse waits until their FRA.
Social Security will take into consideration the amount of your assets, because it is a needs-based program. To be eligible for SSI, your assets must be less than $2,000 for an individual and less than $3,000 for a married couple. However, not all assets count towards the resource limits.
You must start taking Required Minimum Distributions (RMDs) from a traditional IRA at age 73, with the first distribution due by April 1st of the year after you turn 73, and subsequent ones by December 31st each year, though you can withdraw penalty-free (but still taxed) earlier at age 59½; Roth IRAs have no RMDs for the original owner during their lifetime.
The one-word secret to lowering your IRA RMD tax hit is Charity, specifically by making a Qualified Charitable Distribution (QCD) directly from your IRA to a charity, which satisfies your RMD, reduces your taxable income, and avoids income tax on that amount, unlike a normal withdrawal.