403(b) Deferrals and Social Security

Q. My client began to draw Social Security at age 62, and is also working part time. He is aware that any earnings above $15,720 will result is the loss of some of his Social Security benefits. He has asked whether pre-tax deferrals to his 403(b) plan will reduce earnings for purposes of the Social Security earnings test. Will they?

A. Unfortunately, contributions to retirement plans and IRAs do not reduce earnings for purposes of reducing salary for Social Security purposes. The salary is calculated before any such contributions. Thus, any amount earned above $15,720 (in 2015, as indexed) will cause him to lose $1 in Social Security benefits for every $2 above that earnings limit.