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Pensions and SS taxes
Old 01-25-2008, 06:31 AM   #1
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Pensions and SS taxes

Are you required to pay Social Security or Medicare tax on Pensions/Annuities from a previous employer? Or on withdrawals from your IRA/401K portfolio? I have looked at the government site, and If I understand it correctly you only pay on "earned" income.

Thanks, Mike
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Old 01-25-2008, 07:01 AM   #2
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Great question. I hope think the answer is no. The way I read it, SS and medicare tax is only on earned income. My megacorp has been deducting fed and state (erroneously, as I live in IL.) income tax on my pension payment but no SS and FICA ... so I am assuming that none is due (otherwise, the anal b*st*rds that they are, they would've taken them out too).

You do have to pay income taxes on the pension and 401k withdrawals though. Any SS & FICA tax experts out there?

... death and taxes ... as they say
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Old 01-25-2008, 07:38 AM   #3
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No, No and No. You MAY pay INCOME TAXES on SS, generally IRA (other than ROTH IRA) withdrawals will be taxable as generally the pension will be too, depending on your unearned income level. You need to read the little booklets from the IRS as they generally have some applicable information.
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Old 01-25-2008, 07:59 AM   #4
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Originally Posted by R Wood View Post
No, No and No. You MAY pay INCOME TAXES on SS, generally IRA (other than ROTH IRA) withdrawals will be taxable as generally the pension will be too, depending on your unearned income level. You need to read the little booklets from the IRS as they generally have some applicable information.
You are correct, you pay INCOME TAXES on SS and IRA withdrawals and pensions.

HIS QUESTION was do you pay SS and Medicare taxes on Pensions and 401k/IRAs. The answer to that is NO. I THINK.

Where's a good guvmnt w*rker when you want one? anyone a SS or Medicare guy? Or know the FINAL answer? I gave my opinon from my reading and experience with my pension payment. Thanks.
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Old 01-25-2008, 08:22 AM   #5
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I've done some volunteer tax work for AARP for the last couple yrs. We see a lot
of 1099R from pensions. Never seen any entries for SS/Medicare. Income taxes sometimes/usually as it appears to be optional.
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Old 01-25-2008, 08:41 AM   #6
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I've done some volunteer tax work for AARP for the last couple yrs. We see a lot
of 1099R from pensions. Never seen any entries for SS/Medicare. Income taxes sometimes/usually as it appears to be optional.
LOL ... OOOOPPTIONAL TAXES ... that's a good one. Let me know where in the IRS tons of publications that is documented.


I do remember reading something about whether or not you had contributed to the pension. If you had, whatever portions you had contributed were not taxable (or something like that). Since I did not contribute (other than the sweat off of my brow) to my pension, it is entirely taxable.

Please tell me I'm wrong, so I can check the 'optionally decline' box.

This kinda sucks (mildly complaining, but not really) in that I do have to pay taxes. Also the amount of IRA monies I want to roll over to a ROTH IRA will be lessen by that much, if I want to keep tax rates below say, 20% effectively.

... but really I am just venting a bit ('moonshine' and cognac tonight) and not complaining. One of my goals when I was w*rking, that I never reached, was to pay $1M/yr in income taxes... for at least 4 or 5 years.
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Old 01-25-2008, 08:48 AM   #7
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I think kaneohe was referring to the fact that having federal income taxes withheld from your social security payment is optional.

Neither SS nor pension income are subject to FICA/MEDICARE taxes.

Assuming you receive a 1099R each year, it generally provides information as to how much of your pension income is taxable.
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Old 01-25-2008, 08:49 AM   #8
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Quote:
Originally Posted by megacorp-firee View Post
You are correct, you pay INCOME TAXES on SS and IRA withdrawals and pensions.

HIS QUESTION was do you pay SS and Medicare taxes on Pensions and 401k/IRAs. The answer to that is NO. I THINK.

Where's a good guvmnt w*rker when you want one? anyone a SS or Medicare guy? Or know the FINAL answer? I gave my opinon from my reading and experience with my pension payment. Thanks.
What part of NO, NO and NO was unclear? To be clearer (I think) you do not pay SS or MC on any Pension, IRA and or 401K. Additionally, pennies found in parking lots are also tax free from all taxes.
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Old 01-25-2008, 09:34 AM   #9
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What part of NO, NO and NO was unclear? To be clearer (I think) you do not pay SS or MC on any Pension, IRA and or 401K. Additionally, pennies found in parking lots are also tax free from all taxes.
my bad , I guess ... I did not understand what the NO NO NO was refering to. Thanks for the clarification.
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Old 01-25-2008, 10:53 AM   #10
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Cold day in central OH -apologize as I think I was getting a bit sarcastic.
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Old 01-25-2008, 11:03 AM   #11
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Cold day in central OH -apologize as I think I was getting a bit sarcastic.
np ... between being retired and my 2nd Remy for the night, I'm pretty mellow now.
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Old 01-25-2008, 04:56 PM   #12
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Thanks for the replies. Just trying to do some basic planning.

Mike
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Old 01-25-2008, 05:08 PM   #13
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No FICA or SSecurity (same thing) on pension income. In fact you will get it on a 1099 which does not even have a space for it.

Pension income (not previously taxed as earned) is subject to income tax and state tax depending on state of residence. 401K money has not been taxed and is fully taxed as ordinary income when withdrawn. And if you do not withdraw enough beginning at 70 and 1/2 years of age, you will have to withdraw based on tables for life expectancy regardless.

I just had this same argument with hubby. He was so happy no more Ss after this year.
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