At 63 He Collects Social Security and Pulls $90,000 a Year From His IRA. The Earnings Test Everyone Warned Him About Has Never Touched His Check, Because the Agency Only Counts Wages

If you claimed Social Security before full retirement age and rely on your traditional IRA for living expenses, you have probably heard warnings about the Social Security earnings test. Under SSA rules, the earnings test doesn’t apply to IRA withdrawals. A 63-year-old can take $90,000 a year from an IRA, collect a monthly benefit, and have nothing withheld. That is because the Social Security Administration (SSA) counts only earnings from work.

What the Earnings Limit Really Measures

The earnings test only matters if you claim benefits before full retirement age. If you’re under that age for all of 2026, Social Security withholds $1 from your benefit payments for every $2 you earn above the annual limit of $24,480. In the year you reach full retirement age, the limit rises to $65,160, and the reduction eases to $1 for every $3, and only the earnings from the months before your birthday month count. Once you reach full retirement age, the earnings limit disappears entirely, and the SSA lists it as none.

SSA’s Own Rulebook Lists IRA Withdrawals as Exempt

The Social Security Handbook, the agency’s published rulebook, lists the exemption. Section 1812, called “What types of income do NOT count under the earnings test?”, names “Payments from Individual Retirement Accounts (IRA’s) and Keogh Plans.” The same list also excludes “Pensions and retirement pay”, “Interest and dividends from stocks and bonds”, and gains from selling capital assets.

Section 1811 lists what counts, and every item on it comes from work. That includes all wages for employment covered by Social Security, all net earnings from self-employment, and all pay for occasional and regular bonuses. SSA checks this every year by reviewing beneficiaries “who have wages reported for the previous year.” An IRA distribution isn’t reported as wages.

Who Qualifies and Who Gets Caught

The exemption covers early applicants whose income comes from IRAs, Keogh plans, pensions, dividends, interest, and capital gains. It also covers rental income when you don’t run the property. Paychecks and business income are not exempt. Part-time jobs, consulting fees, and gig work all count. So does pay from a non-qualified deferred compensation plan, even if it feels like retirement money. Full retirement age ends the earnings test for everyone.

How to Set Up Your Income Around the Limit

1. IRA withdrawals, pensions, and investment income can cover living costs, and none of these count toward the limit.
2. For those who work, the limit covers combined 2026 wages and net self-employment income, with a threshold of $24,480. The monthly figure for the first-year special rule is $2,040.
3. In SSA’s example of the cost of exceeding the limit, a person with an $800 monthly benefit who earns $33,400 has $4,460 withheld.
4. Any benefits held back come back to you later. SSA says withheld benefits are not “lost”. At full retirement age, your monthly check permanently increases to make up for the withheld months.

Where the IRS Takes Its Share

While SSA ignores your IRA, the IRS counts the withdrawals as income. Money taken from an IRA generally is included in the gross income of the person who receives it. That income then determines how much of your Social Security is taxed under 26 U.S.C. § 86.

The law sets base amounts of $25,000 for single filers and $32,000 for joint returns. Above a second threshold of $34,000 for single filers or $ 44,000 for joint filers, up to 85% of the Social Security benefits received becomes taxable. These thresholds have no inflation adjustment. A single filer taking $90,000 from an IRA is already well past $34,000 on withdrawals alone, so the 85% cap will almost certainly apply.

For 2026, single filers pay 22% on taxable income over $50,400 and 24% over $105,700, with a standard deduction of $16,100. The new senior deduction from the One, Big, Beautiful Bill only applies to taxpayers 65 and older, so a 63-year-old can’t claim it yet.

Medicare adds a delayed cost because Social Security sets Medicare surcharges based on income reported two years ago. That means large IRA withdrawals at 63 can raise your Part B and Part D premiums when Medicare begins at 65.

Your tax bracket and future Medicare premiums respond to IRA withdrawals, and both factor into how much retirees withdraw each year. The years between claiming and the start of required distributions are also the cheapest window to run Roth conversions, which we sized up in a free guide here: The Roth Window.

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