Social Security in 2024 will be affected by 401(k) withdrawals, and it is important to understand how this might impact your benefits. As you approach your full retirement age, it’s crucial to consider the implications of cashing in your 401(k) and how it may affect your Social Security payments. Here’s what you need to know about this complex issue.
Firstly, as you reach your full retirement age in 2024, your work earnings limit will be $59,520 up to the month you reach full retirement age. Beyond that point, there is no limit to how much you can earn from working, so any earnings after reaching full retirement age will not impact your monthly Social Security benefits.
Additionally, withdrawals from your 401(k) could affect your net monthly Social Security payment in two years’ time, as Medicare premiums are based on your combined income from all sources. If your 401(k) withdrawals push you over a certain income threshold, you may be required to pay an additional amount on top of the standard Medicare premium, affecting the net amount of your Social Security payment.
Furthermore, the amount of your 401(k) withdrawals may also impact the taxation of your Social Security benefits. Your combined income from all sources, including your 401(k) withdrawals, will determine whether you owe taxes on your Social Security benefits. Depending on your filing status and total income, up to 85% of your Social Security benefits could be subject to income tax.
In summary, it’s important to carefully consider the implications of cashing in your 401(k) as you approach full retirement age. The decisions you make around your retirement accounts can have lasting effects on your Social Security benefits and tax obligations. Remember, this information is intended for informational purposes only and does not constitute legal or financial advice. Always consult with a qualified professional to address your specific circumstances.