401K While on Early Social Security

Today TaxMama hears from Larry in Texas. He has an interesting question. “I’m 63 and receiving social security retirement benefits. I work part-time. Will contributions to my company 401(k) reduce my taxable income? Specifically, will my contributions reduce my total income, enabling me to exceed the earnings limits for being under full retirement age?”

Dear Larry,

That’s a good question.

I suspect that your 401(k) contributions will not help you stay under the limits for SS benefits.

Why? Your W-2 will report your reduced earnings in box 1. But boxes 3 and 4 will report your full wages, before the 401(k) reduction.
http://www.irs.gov/pub/irs-pdf/fw2.pdf

Here is your earnings limit for 2009:
http://www.ssa.gov/OACT/COLA/rtea.html

Other limits and things are here:
http://www.ssa.gov/pressoffice/factsheets/colafacts2009.htm

You may want to ask the good folks at the Social Security Administration just to be sure. http://www.ssa.gov/pgm/reach.htm

Or perhaps one of our readers already knows?

And remember, you can find answers to all kinds of questions about taking Social Security early and other tax issues, free. Where? Where else? At TaxMama.com

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