No, you don’t pay Social Security tax on 401(k) withdrawals, and you don’t pay Medicare tax on them either. Those payroll taxes apply only to money you earn from work, and the IRS doesn’t treat a retirement account distribution as earned income. What you will owe is regular federal income tax on a traditional 401(k) withdrawal, and the added income can quietly trigger tax on your Social Security benefits and push your Medicare premiums higher.
Why Payroll Taxes Skip Retirement Distributions
Social Security and Medicare are funded through two payroll tax systems: FICA for employees and SECA for the self-employed. Both apply only to compensation earned through work.1Social Security Administration. What Are FICA and SECA Taxes? The employee share of FICA is 6.2% for Social Security (on earnings up to $184,500 in 2026) and 1.45% for Medicare, with the employer matching both.2Internal Revenue Service. Topic No. 751, Social Security and Medicare Withholding Rates
Federal law defines “wages” for FICA purposes as remuneration for employment. Money coming out of a 401(k) is a distribution of previously deferred compensation, not current pay for services, so it falls outside that definition.3Office of the Law Revision Counsel. 26 USC 3121 – Definitions Payroll taxes were already assessed on your own contributions the year you earned them. Employer matching contributions never went through FICA at all. Either way, no Social Security or Medicare tax comes out of the distribution.
The Income Taxes You Will Owe
Payroll tax and income tax are two different things. The absence of one doesn’t tell you anything about the other.
Traditional 401(k)
Every dollar you withdraw from a traditional 401(k) counts as ordinary income in the year you receive it.4Internal Revenue Service. 401(k) Resource Guide Plan Participants General Distribution Rules The distribution stacks on top of your other income for the year, so a large withdrawal can push you into a higher bracket. Your plan administrator reports the amount to you and the IRS on Form 1099-R.
If the distribution is eligible for rollover and you don’t roll it over, the administrator withholds 20% for federal income tax automatically. That’s mandatory, whether your actual tax rate ends up higher or lower.4Internal Revenue Service. 401(k) Resource Guide Plan Participants General Distribution Rules You settle up when you file.
Roth 401(k)
Qualified distributions from a Roth 401(k) owe zero federal income tax. To qualify, you must be at least 59½ and have held the Roth account for at least five years.5Internal Revenue Service. Roth Comparison Chart Contributions went in after tax, so the IRS doesn’t tax them again coming out. Distributions that miss either requirement are only partially tax-free.
The 10% Early Withdrawal Penalty
Taking money from a traditional 401(k) before age 59½ adds a 10% penalty on top of the regular income tax.6Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions Common exceptions that eliminate the penalty include separating from service during or after the year you turn 55 (age 50 for public safety employees of a state or local government), unreimbursed medical expenses above 7.5% of adjusted gross income, distributions to a beneficiary after the account holder’s death, and total and permanent disability. You report the penalty or your exemption from it on Form 5329.
How a 401(k) Withdrawal Can Make Your Social Security Benefits Taxable
This is the indirect Social Security hit that catches retirees off guard. A traditional 401(k) withdrawal raises your adjusted gross income, and higher AGI can turn some of your Social Security benefits into taxable income.
The IRS uses a formula called combined income: adjusted gross income, plus tax-exempt interest, plus half of your Social Security benefits.7Office of the Law Revision Counsel. 26 USC 86 – Social Security and Tier 1 Railroad Retirement Benefits Two thresholds matter:
- Combined income above $25,000 (single) or $32,000 (joint) makes up to 50% of your benefits taxable.
- Combined income above $34,000 (single) or $44,000 (joint) makes up to 85% of your benefits taxable.8Internal Revenue Service. IRS Reminds Taxpayers Their Social Security Benefits May Be Taxable
These thresholds have never been adjusted for inflation, so more retirees cross them every year. Consider a married couple with $30,000 in Social Security and $20,000 in other income. Their combined income is $35,000, just above the first threshold. Take a $10,000 traditional 401(k) withdrawal and combined income jumps to $45,000, clearing the second threshold of $44,000. Up to 85% of their Social Security benefits is now taxable instead of a much smaller portion. That single $10,000 withdrawal generated income tax not only on itself but also on roughly $25,500 of Social Security benefits that would otherwise have gone untaxed.
Roth 401(k) withdrawals don’t enter adjusted gross income, so they don’t push combined income up. Drawing from Roth accounts in years when you’re near a threshold can keep more of your Social Security tax-free.
How a Withdrawal Can Raise Your Medicare Premiums
Large 401(k) withdrawals can also raise your Medicare premiums through the Income-Related Monthly Adjustment Amount, or IRMAA. The Social Security Administration looks at your modified adjusted gross income from the tax return you filed roughly two years earlier to set the surcharge.9Social Security Administration. Premiums: Rules for Higher-Income Beneficiaries For 2026 premiums, that generally means your 2024 return.
The standard 2026 Medicare Part B premium is $202.90 per month.10Centers for Medicare & Medicaid Services. 2026 Medicare Parts A & B Premiums and Deductibles The 2026 Part B IRMAA brackets add the following on top of the standard premium:
- Single up to $109,000 / joint up to $218,000: no surcharge.
- Single $109,001–$137,000 / joint $218,001–$274,000: additional $81.20 per month.
- Single $137,001–$171,000 / joint $274,001–$342,000: additional $202.90 per month.
- Single $171,001–$205,000 / joint $342,001–$410,000: additional $324.60 per month.
- Single $205,001–$499,999 / joint $410,001–$749,999: additional $446.30 per month.
- Single $500,000+ / joint $750,000+: additional $487.00 per month.10Centers for Medicare & Medicaid Services. 2026 Medicare Parts A & B Premiums and Deductibles
Parallel IRMAA surcharges apply to Part D prescription drug coverage at the same income thresholds. At the top bracket, a single filer pays the $487.00 Part B surcharge plus a $91.00 Part D surcharge each month, close to $7,000 a year on top of ordinary premiums.
The two-year lookback makes timing painful. A one-time large 401(k) withdrawal in 2024 can spike your premiums in 2026 even after your income normalizes. If the spike stems from a qualifying life-changing event like work stoppage, loss of pension income, or the death of a spouse, you can request a reduction by filing Form SSA-44.11Social Security Administration. Medicare Income-Related Monthly Adjustment Amount – Life-Changing Event A routine 401(k) withdrawal that simply happened to be large does not qualify, so the practical defense is sizing the withdrawal before it hits a tax return. Spreading a $60,000 need across three $20,000 withdrawals, for instance, can keep you below the next IRMAA tier and below the 85% Social Security threshold in each year.
What About the Social Security Earnings Test?
If you claim Social Security before full retirement age, you may have heard that earning too much can reduce your monthly benefit. A 401(k) withdrawal won’t do that. The earnings test counts only wages from a job and net self-employment income. Pension payments, annuities, investment income, and retirement account distributions are all excluded.12Social Security Administration. Will Withdrawals From My Individual Retirement Account Affect My Social Security Benefits? You can take a distribution of any size without any earnings-test reduction to your check.
The takeaway is worth holding onto in two parts. Directly, no Social Security or Medicare tax comes out of a 401(k) withdrawal, and the earnings test ignores it. Indirectly, a traditional withdrawal raises the AGI figure that drives both Social Security benefit taxation and Medicare IRMAA, so the real cost of a distribution often runs higher than your marginal income tax bracket alone would suggest.