YOU BE THE JUDGE

Date: March 30, 2007

John had retired at the age of 62 and was working part-time.  He understood that any earned income over $12,960.00 would result in his own Social Security benefits being reduced $1.00 for every $2.00 above that sum that he earned.  John was very careful to limit his income because he wanted to avoid the deductions from his Social Security.  John also wanted to start drawing out benefits from his IRA and utilize that income as well.

Question:  Will the income that John takes from his IRA be considered taxable income and thus, possibly result in a reduction in John’s Social Security.

Answer:    Generally, Social Security only considers earned income and not money from investments, such as an IRA distribution, in deciding whether or not to reduce Social Security benefits.  IRA distributions taken at the age of 59 1/2 or older are not considered taxable income if the IRA was in existence for at least five years.  You must be cautious that if you take distribution before 59 1/2, you will have to pay a 10% tax, although certain exceptions apply.

Joe Price
Attorney Joe Price is a seasoned Trial Lawyer serving Northeast, Central and Southeast Pennsylvania for the past forty (40) years. He has handled serious personal injury cases in courts throughout the Federal system including New Jersey and New York. Attorney Price is A.V. Rated by Martindale Hubble. He is Board Certified in Civil Practice by the National Board of Trial Advocacy since 1996.