Maine, USA – A reader from Maine is seeking advice about retirement and social security. The reader, who will reach full retirement age in 2024, is considering cashing in on their 401(k) and wants to know how it will affect their social security and tax implications. Here’s what you need to know:
Firstly, it’s important to note that once the reader reaches full retirement age in 2024, their work earnings limit will no longer apply. This means that their part-time work earnings prior to September 2024 won’t negatively affect their gross monthly Social Security benefit, as long as it doesn’t exceed a certain limit.
Additionally, the reader should consider the impact of Medicare premiums on their social security payments. If they choose to withdraw from their 401(k), it could affect their net monthly Social Security payment two years from now. This is because Medicare premiums are based on the reader’s combined income from all sources, which includes 50% of their Social Security benefits.
Furthermore, the reader should be aware of the income tax implications on their Social Security benefits. The IRS calculates their “Modified Adjusted Gross Income” (MAGI), which includes income from all sources, except for ROTH IRA withdrawals. Depending on their filing status, if their MAGI exceeds certain thresholds, a portion of their Social Security benefits received during the tax year may be subject to income tax.
In summary, it’s important for the reader to carefully consider the implications of cashing in on their 401(k) before reaching full retirement age. While their part-time work earnings may not affect their Social Security benefits, Medicare premiums and income tax implications should be taken into account. Seeking expert advice on tax and retirement matters is advised to ensure a smooth transition into retirement.
For more information and to submit a question to a certified social security advisor, visit the AMAC Foundation website or email the provided address.