Jasmine Birtles
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How to Balance Social Security and Required Minimum Distributions Without Losing Money
Moneymagpie Team
23rd Jul 2025
Preparing for retirement is always an exciting phase; you’ve worked for most of your adult years, and now it is time to rest, so you can go on vacations and tour with your loved ones. However, some puzzles must be put together to avoid tax traps and boost your income strategy. This guide will explain everything you need to know about maximizing retirement income and how to keep your accounts afloat.
- What Is Social Security?
- What Is a Required Minimum Distribution (RMD)?
- Do Social Security and RMDs Affect Each Other?
- Endnote
What Is Social Security?
Social Security is a federal insurance scheme in the form of monetary assistance that caters to pensioners and workers who are disabled, providing retirement benefits based on your work history and the taxes you pay over time.
However, you can only start claiming these benefits when you are at least 62 years old and have consistently paid into the system for a minimum of 10 years. This is a measure to ensure government workers stay committed to qualifying for social security retirement benefits during their service years.
In addition, workers who wait until they are 70 years of age before they start collecting social security payments will receive higher monthly benefits. Social Security is a steady retirement paycheck from the government, which has been accumulated over your 35 highest-earning years, so it varies from person to person.
When the worker is deceased, the wife, children, or the next of kin are eligible to claim survivor benefits based on the worker’s earnings record. Likewise, mentally or physically disabled individuals, whose ailments are expected to last for a year or more, might also be eligible for Social Security disability benefits (SSDI) if they meet the earning test.
What Is a Required Minimum Distribution (RMD)?
Unlike Social Security, this is the amount of money that must be withdrawn annually from an individual retirement plan once they hit age 73; otherwise, there would be tax penalties of 25% on the amount not withdrawn from the Internal Revenue Service (IRS).
Generally, individuals are expected to start making these withdrawals from the 1st of April of the year they turn 73 from their retirement accounts, which include traditional individual retirement accounts (IRA), company-sponsored retirement accounts like 401(k), and tax-sheltered annuity plans (403(b)).
To calculate an RMD, write down your total account balance from December 31st of the previous year, then proceed to finding the distribution factor listed on the latest IRS worksheet, ensuring it corresponds to your age for the current year. Finally, divide the account balance by the factor distribution number to find the specific RMD.
Do Social Security and RMDs Affect Each Other?
Yes, Social Security & required minimum distributions affect each other. This is because RMDs increase the tax that can be taken from your savings or income, which might make your Social Security benefits taxable as well, thereby costing you thousands in the long run. To avoid these high taxes, always make RMD withdrawals from your retirement accounts. This would lower your balance and your future RMD amount.
Endnote
If you are nearing retirement, coordinating your Social Security and required minimum distributions helps reduce your tax bills, stretch your savings, and ensure you have something left in your pocket when you are no longer working. Think of it as systems put in place to monitor your spending and retirement benefits. You’ve worked hard your whole life to save; now it’s time to make your money work smart for you.
Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.
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