Social Security Benefits
The most common form of Social Security benefits is the Social Security retirement benefit that individuals receive once they reach retirement age. As you work, a portion of the taxes you pay go toward your Social Security retirement benefits. When you reach the federal retirement age and retire, you begin receiving a monthly benefits payment based on the money you paid in to Social Security throughout your life. This payment is intended as a supplement to your retirement savings and other retirement plans.
A 401k is an investment plan sponsored by your employer that allows you to contribute a portion of each paycheck for investment purposes. The withdrawn portion isn't taxed, providing you with a slight reduction in income taxes at the time of withdrawal. Once you reach retirement age, distribution payments from the 401k plan's balance are made monthly or on another regular schedule to provide you with a steady income that covers your expenses once you retire.
Benefits and Distributions
Social Security retirement benefits are not directly affected when you receive distributions from a 401k plan. Your benefit amount is not reduced or altered as a result of you having additional retirement income since Social Security benefits are only intended as a supplement to other funds. The only real effect of receiving 401k distributions and Social Security retirement benefits together is that your income may elevate to the point that you must pay taxes on your earnings; individuals receiving more than $25,000 are taxed on 50 percent of their benefits, while individuals receiving more than $34,000 per year pay taxes on their full benefit amount. If married and filing jointly, these limits increase to $32,000 and $44,000 respectively.
Other Benefit Types
Though retirement benefits are the most common form of Social Security benefits, some individuals receive other benefit types, such as Social Security disability benefits. The majority of these benefit types are unaffected by 401k plans and convert to standard Social Security benefits once you reach retirement age. Supplemental Security Income, a program managed by the Social Security Administration to supplement other benefits, takes your income into account and may suffer a reduction if you receive 401k distributions.