Do 401k withdrawals count as income for Medicare?
Asked by: Dr. Ron Gutmann | Last update: November 24, 2025Score: 4.2/5 (13 votes)
Do 401k withdrawals count as Social Security income?
The short answer is no, taking a distribution from your 401(k) does not impact your eligibility for (or the amount of) your Social Security benefits.
What counts as income for Medicare premiums?
We use the most recent federal tax return the IRS provides to us. If you must pay higher premiums, we use a sliding scale to calculate the adjustments. This is based on your "modified adjusted gross income" (MAGI). Your MAGI is your total adjusted gross income and tax-exempt interest income.
Is 401k withdrawal considered earned income?
Is a 401(K) Withdrawal Considered Earned Income or Capital Gains? Traditional 401(k) withdrawals are considered income (regardless of your age). However, you won't pay capital gains taxes on these funds.
Is 401k excluded from Medicare wages?
The amounts deferred under your 401(k) plan are reported on your Form W-2, Wage and Tax Statement. Although elective deferrals are not treated as current income for federal income tax purposes, they are included as wages subject to Social Security (FICA), Medicare, and federal unemployment taxes (FUTA).
Do 401K Withdrawals Count As Income Against Social Security? - SecurityFirstCorp.com
Does Medicare consider 401k withdrawals as income?
You may not be rich, but your 401(k) and regular IRA withdrawals become taxable income, and you may look rich to Medicare. If you take out too much tax-deferred money, it can cause your Medicare monthly premiums to go up. This is called IRMAA (income related monthly adjustment amount).
What is not counted in Medicare wages?
This differs from your gross earnings because there are certain deductions that reduce your Medicare taxable wages, such as pretax medical/dental and vision insurance, and FSA Medical and Dependent Care. Retirement deposits and Tax-Deferred Savings Plans do not reduce your Medicare taxable wages.
Does money that goes into 401k count as income?
Although your pretax 401(k) contributions are tax deductible today, you'll eventually have to pay taxes on the money. It's important to be aware of your marginal tax bracket, because any 401(k) withdrawals that aren't rolled over into a qualified plan or IRA will be treated as regular income.
How to avoid 20% tax on 401k withdrawal?
Deferring Social Security payments, rolling over old 401(k)s, setting up IRAs to avoid the mandatory 20% federal income tax, and keeping your capital gains taxes low are among the best strategies for reducing taxes on your 401(k) withdrawal.
Does 401k count as income for Medicaid?
The retirement accounts relevant to this discussion are IRAs, 401(k)s, 403(b)s, Keoghs and TSAs. Since California has no asset limit, so the value of retirement accounts does not matter for California Medicaid (Medi-Cal) applicants.
What does Medicare include as income?
MAGI is adjusted gross income (AGI) plus these, if any: untaxed foreign income, non-taxable Social Security benefits, and tax-exempt interest.
What income is used to determine Medicare premiums for 2025?
So, for 2025, the SSA looks at your 2023 tax returns to see if you must pay an IRMAA. IRMAA is calculated every year. That means if your income is higher or lower year after year, your IRMAA status can change.
Does everyone have to pay $170 a month for Medicare?
Most people pay no premiums for Part A. For Medicare Part B in 2025, most beneficiaries will pay $185 per month. Certain factors may require you to pay more or less than the standard Medicare Part B premium in 2025.
Are 401k withdrawals taxed for Social Security and Medicare?
Other income—such as qualified withdrawals from a Roth IRA, a Roth 401(k), or a health savings account (HSA)—are not subject to federal income taxation and do not factor into how your Social Security benefit is taxed.
What happens if I don't report my 401k withdrawal?
Because the taxable amount is on the 1099-R, you can't just leave your cashed-out 401(k) proceeds off your tax return. The IRS will know and you will trigger an audit or other IRS scrutiny if you don't include it. However, there are a couple things you can do.
What income does not count against Social Security?
For the earnings limits, we don't count income such as other government benefits, investment earnings, interest, pensions, annuities, and capital gains.
Are 401k withdrawals considered income?
401(k) withdrawals are considered taxable income, so they're taxed at your ordinary income tax rate. Having a diverse mix of assets to work with in retirement can help you make strategic decisions that can help to minimize the impact of taxes.
What are the new 401k withdrawal rules for 2024?
Since Jan. 1, 2024, however, a new IRS rule allows retirement plan owners to withdraw up to $1,000 for unspecified personal or family emergency expenses, penalty-free, if their plan allows.
Which of the following is unearned income?
Unearned income includes investment-type income such as taxable interest, ordinary dividends, and capital gain distributions. It also includes unemployment compensation, taxable social security benefits, pensions, annuities, cancellation of debt, and distributions of unearned income from a trust.
Does a withdrawal from my 401k affect my Social Security benefits?
The income you receive from your 401(k) or other qualified retirement plan doesn't affect the amount of the Social Security retirement benefit you receive each month, but does affect whether your benefits are taxable.
How to avoid taxes when withdrawing from a 401k?
The easiest way to borrow from your 401(k) without owing any taxes is to roll over the funds into a new retirement account. You may do this when, for instance, you leave a job and are moving funds from your former employer's 401(k) plan into one sponsored by your new employer.
Is borrowing from your 401k considered income?
Any money borrowed from a 401(k) account is tax-exempt, as long as you pay back the loan on time. And you're paying the interest to yourself, not to a bank.
What income is counted for Medicare premiums?
The income that counts is the adjusted gross income you reported plus other forms of tax-exempt income. If you are expected to pay IRMAA, SSA will notify you that you have a higher Part B premium.
Is a 401k included in Medicare wages?
Social Security and Medicare Wages are calculated by adding Employee contributions to 401(k), 403(b), 457(b), and other retirement plans from Federal and State Taxable Wages.
What is excluded under Medicare?
Long-term care includes non-medical care for people who have a chronic illness or disability. This includes non-skilled personal care assistance, like help with everyday activities, including dressing, bathing, and using the bathroom. Medicare and most health insurance plans, don't cover long-term care.