Relying Heavily on This Popular Retirement Account Could Cost You Future Social Security Benefits -- What to Do Instead
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By Kailey Hagen, CFP – Apr 24, 2026 at 11:00AM ESTKey PointsTraditional 401(k)s require you to pay tax on your withdrawals in retirement.This can raise your provisional income, forcing you to pay tax on more of your Social Security benefits.You can mitigate this issue by keeping some of your savings in Roth accounts.Your retirement savings and your future Social Security benefits can both help cover your living costs in retirement. But what many don't realize is that where you save for retirement can affect how much of your Social Security checks you're allowed to keep. There's one popular account in particular that could cost you down the road. If you're stashing a lot of money here, it's not too late to change your strategy so you can hold on to more of your Social Security benefits in retirement. Image source: Getty Images. Why your traditional 401(k) could hurt your Social Security benefits Traditional 401(k)s are among the most popular retirement accounts for several reasons: high contribution limits, an up-front tax break when you make contributions, and the possibility of an employer match. Together, they can enable you to make quick progress toward your savings goals, especially if you're making regular contributions. But there's a catch. When you take money out of your traditional 401(k), you'll owe ordinary income tax on it. This raises your provisional income, which the government defines as your adjusted gross income (AGI), plus any nontaxable interest from municipal bonds, and half your annual Social Security benefit. The government uses your provisional income and your marital status to determine how much of your Social Security benefits are taxable each year. The following table breaks down what percentage of your benefits you could owe income tax on: Marital Status 0% of Benefits Taxable If Provisional Income Is Below: Up to 50% of Benefits Taxable If Provisional Income Is Between: Up to 85% of Benefits Taxable If Provisional Income Exceeds: Single $25,000 $25,000 and $34,000 $34,000 Married $32,000 $32,000 and $44,000 $44,000 Source: Social Security Administration. So, counterintuitively, the 401(k) funds you withdraw to help supplement your Social Security checks could actually cost you some of those same benefits by raising your tax bill. But there is a way to mitigate this. Roth savings give you more control over your tax liability If you're worried about running into this problem, stash some of your savings in a Roth 401(k) if you have one, or a Roth IRA. You will pay tax on these contributions in the year that you make them, but then that money grows tax-free afterward. When you make withdrawals in retirement, they won't count toward your taxable income, provided you have had a Roth account for at least five years. These withdrawals can help keep your provisional income low, which enables you to hold on to more of your hard-earned Social Security benefits. If you already have a lot of personal savings in a traditional 401(k), you might be able to do a Roth IRA conversion to change some of your traditional 401(k) funds into Roth savings. But you'll have to pay tax on the converted amount in the year you do it. You can spread this out over several years to slowly build your Roth savings while minimizing the tax liability.Read NextApr 24, 2026 •By Maurie BackmanHow to Tell If Your Retirement Savings Are on Track -- a Simple Spring 2026 CheckupApr 24, 2026 •By Katie BrockmanA New Social Security Proposal Could Help Protect the Trust Funds -- but There's a CatchApr 24, 2026 •By Kailey Hagen, CFP5 Social Security Milestones All Married Couples Should KnowApr 24, 2026 •By Kailey Hagen, CFPWhat the Average Retiree Actually Receives From Social SecurityApr 24, 2026 •By Dana GeorgeConcerned About Social Security Insolvency? Here's What's Likely to Happen NextApr 24, 2026 •By Maurie BackmanHow to Avoid the Social Security Earnings Penalty If You're Still Working in 2026About the AuthorKailey Hagen, CFP, is a contributing Motley Fool retirement analyst covering Social Security, Medicare, and retirement planning.
Before The Motley Fool, Kailey was a research analyst for Reviews.com focusing on credit and banking products. She is a Certified Financial Planner® and holds a bachelor’s degree in English from the University of Wisconsin-Madison.TMFKailey