You do not pay FICA taxes on 401(k) distributions. Withdrawals from a 401(k) plan are not treated as wages, so neither the 6.2% Social Security tax nor the 1.45% Medicare tax applies when the money leaves the account. Federal income tax is a separate matter, and it usually does apply.
Why the FICA Exemption Exists
Federal law excludes payments from qualified retirement trusts, including 401(k) plans, from the definition of “wages” used to calculate FICA.1Office of the Law Revision Counsel. 26 U.S. Code 3121 – Definitions The exclusion covers every kind of withdrawal: periodic payments, lump sums, and required minimum distributions. Once the money is a distribution rather than compensation for work, Social Security and Medicare tax are off the table.
The reason is that FICA has already been settled on those dollars. Payroll tax is a tax on earned income, and by the time you take a distribution, the money has already passed through the payroll tax system on the way in. Charging FICA a second time at withdrawal would tax the same earnings twice.
How FICA Was Handled When You Contributed
Elective deferrals into a traditional 401(k) reduce your federal income tax for the year, but they do not reduce your Social Security or Medicare wages. Your employer calculates FICA on your full gross pay before the 401(k) deduction comes out.2Internal Revenue Service. 401(k) Plan Overview
Say you earn $80,000 and defer $10,000 into your 401(k). You pay federal income tax on $70,000, but you and your employer each pay 6.2% Social Security tax and 1.45% Medicare tax on the full $80,000.3Internal Revenue Service. Retirement Plan FAQs Regarding Contributions Paying FICA upfront clears the payroll tax obligation on those dollars for good.
Social Security tax stops applying above a yearly earnings cap, so if your salary exceeds that cap, wages above it are not subject to the 6.2% portion. Medicare has no cap, and 401(k) deferrals count toward your Social Security wages, so contributing does not push your earnings back below the cap.
Employer Matching Contributions Never See FICA
Employer matching dollars follow a different path. When your employer deposits a match into your 401(k), those dollars are not included in your Social Security or Medicare wage base at any point.3Internal Revenue Service. Retirement Plan FAQs Regarding Contributions Neither party pays FICA on the match going in, and no FICA is owed when it comes out.
Match dollars therefore move through the full retirement cycle without ever being subject to Social Security or Medicare tax. One tradeoff: because they never enter your Social Security wage record, they do not build your future Social Security benefit.
Federal Income Tax Still Applies
The FICA exemption does not extend to income tax. Withdrawals from a traditional 401(k) are taxed as ordinary income in the year you receive them, at your regular tax rate rather than the capital gains rate.4Internal Revenue Service. 401(k) Resource Guide – Plan Participants – General Distribution Rules
If you take an eligible rollover distribution and have it paid to you directly, the plan must withhold 20% for federal income tax, even if you plan to complete the rollover yourself within 60 days.5Internal Revenue Service. Topic no. 412, Lump-Sum Distributions A direct rollover, where the funds move plan-to-plan without touching your bank account, avoids that mandatory withholding.6Internal Revenue Service. Topic no. 413, Rollovers From Retirement Plans
Withdrawals taken before age 59½ generally carry an additional 10% tax on top of regular income tax, with exceptions such as separation from service in or after the year you turn 55.7Office of the Law Revision Counsel. 26 U.S. Code 72 – Annuities; Certain Proceeds of Endowment and Life Insurance Contracts The 10% penalty is an income tax add-on, not a FICA charge. Early distributions remain exempt from Social Security and Medicare tax whether the penalty applies or not.
Roth 401(k) Distributions
Roth 401(k) contributions get the same FICA treatment as traditional deferrals: your employer withholds Social Security and Medicare tax on the full gross pay, including the Roth amount.3Internal Revenue Service. Retirement Plan FAQs Regarding Contributions Roth contributions are also made with after-tax dollars for income tax purposes, so you pay federal income tax on them in the year you contribute.
Qualified Roth 401(k) withdrawals, generally those taken after age 59½ and at least five years after your first Roth contribution, come out free of federal income tax.8Internal Revenue Service. Retirement Plans FAQs on Designated Roth Accounts Paired with the FICA exemption that covers every 401(k) distribution, a qualified Roth withdrawal faces no federal payroll tax and no federal income tax.
Solo 401(k) Plans and Self-Employment Tax
If you are self-employed with a solo 401(k), self-employment tax replaces FICA on the contribution side. Elective deferrals reduce your income tax but do not reduce the earnings base used to calculate self-employment tax, which mirrors how employee deferrals work for FICA.9Internal Revenue Service. Publication 560, Retirement Plans for Small Business The rate is 15.3% on net earnings, covering both halves of Social Security and Medicare, with half deductible when you calculate adjusted gross income.
Distributions from a solo 401(k) work the same as any other qualified plan withdrawal. No Social Security or Medicare tax is owed on the money coming out.1Office of the Law Revision Counsel. 26 U.S. Code 3121 – Definitions
What the Tax Forms Show
Your W-2 records the FICA paid on your contributions while you were working. Box 3 is your Social Security wages and Box 5 is your Medicare wages, both of which include your 401(k) deferrals. Boxes 4 and 6 show the Social Security and Medicare tax actually withheld.10Internal Revenue Service. 2026 General Instructions for Forms W-2 and W-3
When distributions start, you receive Form 1099-R instead. It has a box for federal income tax withheld, but no fields for Social Security or Medicare tax, and the IRS instructions tell plan administrators not to report payroll tax withholding on it.11Internal Revenue Service. 2025 Instructions for Forms 1099-R and 5498 The form you receive in retirement has nowhere to put a FICA number because none is owed.