Social Security and 403(b) Contributions

Q. My client is age 62, and is drawing a reduced Social Security benefit. He understands that he can earn up to $15,480 before beginning to lose Social Security benefits. He calculates that he will be about $3,000 above the $15,480 from substitute teaching income, and he has suggested that he contribute $3,000 to his 403(b) plan to reduce his earnings so that he can escape any loss of Social Security benefits. Can he do that?

A. No. The earnings are calculated before salary is reduced for the 403(b) contribution; thus, the excess earnings of $3,000 would result in a reduction in Social Security benefits of about $1,500 ($1 in lost benefits for every $2 above the earnings limit).

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