Benefits Planner: Retirement | What Income is Included in your Social Security Record? (2024)

FAQs

Benefits Planner: Retirement | What Income is Included in your Social Security Record? ›

Only earned income, your wages, or net income from self-employment is covered by Social Security. If money was withheld from your wages for “Social Security” or “FICA,” your wages are covered by Social Security.

We don't count pensions, annuities, investment income, interest, veterans benefits, or other government or military retirement benefits. Your benefits may increase when you work: As long as you continue to work, even if you are receiving benefits, you will continue to pay Social Security taxes on your earnings.

When you receive income from your traditional 401(k), 403(b) or 457 salary reduction plans, you'll owe income tax on those amounts. This income, which is produced by the combination of your contributions, any employer contributions and earnings on the contributions, is taxed at your regular ordinary rate.

Social Security benefits replace a percentage of a worker's pre-retirement income. The amount of your average wages that Social Security retirement benefits replaces varies depending on your earnings and when you choose to start benefits.

Social Security is part of the retirement plan for almost every American worker. It provides replacement income for qualified retirees and their families. This section of our website helps you better understand the program, the application process, and the online tools and resources available to you.

For the earnings limits, we don't count income such as other government benefits, investment earnings, interest, pensions, annuities, and capital gains.

How much will my Social Security benefits be reduced? We'll reduce your Social Security benefits by two-thirds of your government pension. In other words, if you get a monthly civil service pension of $600, two-thirds of that, or $400, must be deducted from your Social Security benefits.

Retirement Income: Retirement income can include social security benefits as well as any benefits from annuities, retirement or profit sharing plans, insurance contracts, IRAs, etc. Retirement income may be fully or partially taxable.

They also include bonuses, commissions, and vacation pay. Social Security doesn't count pensions, annuities, investment income, interest, veterans' benefits, or other government or military retirement benefits.

SSDI payments are not affected by having a house, a car, money in the bank, or owning other possessions. On the other hand, many SSI clients are surprised to learn that assets do affect their benefits.

How does Social Security determine your income when you retire? ›

Average Indexed Monthly Earnings (AIME)

After we determine the number of years, we choose those years with the highest indexed earnings, sum such indexed earnings, and divide the total amount by the total number of months in those years. We then round the resulting average amount down to the next lower dollar amount.

Social Security tax FAQs

Social Security income can be taxable no matter how old you are. It all depends on whether your total combined income exceeds a certain level set for your filing status. You may have heard that Social Security income is not taxed after age 70; this is false.

Social Security offers a monthly benefit check to many kinds of recipients. As of April 2024, the average check is $1,776.73, according to the Social Security Administration – but that amount can differ drastically depending on the type of recipient. In fact, retirees typically make more than the overall average.

Pension payments, annuities, and the interest or dividends from your savings and investments are not earnings for Social Security purposes.

You can retire with Social Security and a pension at the same time, but the Social Security Administration (SSA) might reduce your Social Security benefit if your pension is from a job at which you did not pay Social Security taxes on your wages. There are two different kinds of pensions: covered and noncovered.

Your benefit might be reduced if you get a pension from a government employer who wasn't required to withhold Social Security taxes. This reduction is called the “Government Pension Offset” (GPO). Learn more about this reduction (PDF).

The quick answer is, “No.” While the ability to collect Social Security benefits may be restricted based on earned income and the SSA's “Earnings Test,” the SSA does not consider IRA distributions as earned income for this purpose.