I'm over 62.5 years old and semi-retired. I have a part-time gig that pays about $23K per year. I'd like to pull the trigger on Social Security, but I make too much. (I have another small gig that pays $1750 per year.)

My employer started offering a traditional (simple) IRA, and (sort of surprising that I qualify) which they will put some money in. I have the option of contributing myself. They said I can put in as much as I want. I'm wondering if I can contribute enough to reduce my income to below the SS thresh hold, and thereby not have to pay tax on SS.

The job is such that if $23K is too high to make this scheme work, my boss would be delighted to reduce my salary to $22K or $18K. So if it's not workable for $23K, I'd still be interested in the answer. When the SSA decides how much you make for the year to determine whether you pay taxes on SS, does it count IRA contributions?

3 Answers 3


There are actually two distinct things you may need to consider:

  • Benefit reduction. if you get SS retirement benefit below 'full retirement age' (which for someone now 62.5 will probably be 67) and have over $19,560 (for 2022) earned income, they reduce the benefit (before you even receive it) by $1 for each $2 over the threshold. This reduction stops entirely the month you reach full retirement age, and is greatly reduced (to $1 for $3 above $51,960) for the previous months in the same year. Once at full retirement age, they say they will 'give you credit for [the reductions]' but don't give specifics; the PDF (see next para) p7 gives two examples of complete withholding (i.e. reduction to zero) that look to me like they might be spreading the repayment over your life expectancy.

    The webpage doesn't say what exactly earned income means. The PDF linked in the second blue box says on p4 "We do count an employee’s contribution to a pension or retirement plan, however, if the contribution amount is included in the employee’s gross wages". I suspect this means they use SS-taxable wages from W-2 box 3 rather than income-taxable wages from box 1, because box 1 does NOT include tax-qualified plans while box 3 does, but this is not really clear. It does say on p6 that you must tell them what you expect earnings to be, and notify them if it changes (as is necessary for them to reduce the monthly payments timely) and they add "If you need help figuring your earnings, contact us." You could try calling them and see if they will figure this before you have an actual benefit record in their system.

    But it does look to me like probably you are subject to this unless you reduce your actual total earnings. Unearned income including pension, investments etc does not matter.

  • Taxability of benefits. This has been covered well by the other answers; if half your SS benefit (as paid, after the reduction above if it applies) plus almost all other income -- both earned and unearned like pension or investments, and even adding muni-bond interest if any -- exceeds $25k for individual or $32k for MFJ then part of your benefit becomes taxable. For this, income does exclude tax-qualified retirement contributions/deferrals. Since your SS benefit figures in the computation there is no fixed threshold for other income -- if you get $12k SS you could have $19k other income but if you get $36k SS you could have only $7k other. And SSA is not involved at all, it is done solely on your income-tax return.

    But when this tax applies you don't get anything back for it, and it does not automatically end, it continues as long as you get SS benefit and have enough other income. In fact if your benefit is reduced by the first item, and therefore increases when 'recalculated' at full retirement age, that means more benefit going into your combined income and possibly causing tax liability.

  • Good info about benefits reduction, I was not aware of that component but it may actually be more important than the taxability of benefits.
    – Craig W
    Aug 18, 2022 at 18:45

https://www.ssa.gov/benefits/retirement/planner/taxes.html says:

You will pay tax on only 85 percent of your Social Security benefits, based on Internal Revenue Service (IRS) rules. If you:

  • file a federal tax return as an "individual" and your combined income* is between $25,000 and $34,000


Your adjusted gross income

+ Nontaxable interest

+ ½ of your Social Security benefits

= Your "combined income"

https://www.irs.gov/pub/irs-pdf/f1040.pdf says your "adjusted gross income" is "Wages, salaries, and tips, etc. (Form W-2)" minus (among other things) "Adjustments to income from Schedule 1, line 26".

https://www.irs.gov/pub/irs-pdf/f1040s1.pdf includes "Self-employed SEP, SIMPLE, and qualified plans" as one of those adjustments.

That sounds like money sent pre-tax to a Traditional SIMPLE IRA will not count towards taxation of social security benefits.

  • (1) You've truncated the quote too soon. For individual with 'combined income' $25k-34k up to 50% of benefit it taxable; over 34k up to 85% is. If OP reduces work income to say 20k and has 24k SS benefit and no (or tiny) other income, that's combined=32k which is in the 50% range, but for that benefit getting to no-tax would require reducing work to 13k. Aug 17, 2022 at 6:33
  • (2) Self-employed SEP/SIMPLE/qual is an adjustment on schedule 1 line 16 but OP here is not self-employed; SEP/SIMPLE/qual from an employer is an exclusion that is omitted from W-2 box 1 and thus from 1040 line 1. These are different methods but both result in not being counted for SS taxability (and not for income tax computation either). SSA is not exactly right here; the IRS worksheet doesn't allow all the schedule 1 part 2 adjustments, only most of them. Aug 17, 2022 at 6:34

You're at $24,750 of income. Assuming filing single, the threshold for Social Security benefits starting to be taxed is a combined income of $25,000. I don't know much about SIMPLE IRAs but I suspect those pre-tax contributions will be deducted from your wages (if not, even if you deduct them on Schedule 1 it still works out the same). So essentially you have: 24750 − pre-tax SIMPLE IRA contributions + 0.5 × Social Security benefits = 25000. Plug in your Social Security benefits and then solve for pre-tax SIMPLE IRA contributions. Worth mentioning, even if you go a little over the threshold, only the marginal amount will be 50% taxable, so not the end of the world.

Also, it's not really the SSA that determines the extent to which your Social Security benefits are taxable. You figure this yourself when you file your tax return--see the Social Security Benefits Worksheet in the 1040 instructions for line 6. Even if the SSA withholds some of your Social Security benefits for taxes, you should get the withheld amount refunded back to you assuming it isn't needed to cover your regular income tax liability.


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