Q. My client has elected to receive Social Security benefits before normal retirement age, and, in 2013 is earning $17,000 in part-time work with his employer. Since he would lose Social Security benefits for the amount that exceeds $15,120 in 2013, he has asked whether salary reduction contributions to his 403(b) plan will reduce salary for purposes of the earnings test. In other words, if he contributes $2,000 to his 403(b) plan, will his earnings for purposes of the earnings test be $15,000 which would avoid loss of Social Security benefits?
A. Unfortunately, voluntary contributions via salary reduction do not reduce earnings for purposes of the early Social Security benefit. He will still be earning $17,000 for that test, meaning he will lose $1 in benefits for every $2 above the $15,120 earnings limit in 2013.