Does My 403(b) Reduce My Social Security Benefits?

How much you receive in Social Security benefits depends on how much you paid into the system in taxes, the age at which you start receiving benefits and whether you work while getting benefits. Income from a 403(b) retirement plan has no effect on your benefit amount. However, it could affect whether your benefits are taxed.

Your Social Security benefits are calculated based on your income during your working years, which dictated how much you paid in Social Security taxes. You can start receiving benefits at age 62, but the longer you wait, the higher your monthly benefit will be. You get your maximum monthly benefit by waiting until your full retirement age, which is 65 to 67, depending on when you were born.

If you start drawing benefits before reaching your full retirement age but continue working and earning money, then your benefits will be reduced based on how much you earn. Money from a 403(b) plan, however, is classified as "unearned income." Unearned income has no effect on your benefits.

Receiving money from a 403(b) retirement plan might push your income high enough that some of your Social Security benefits become taxable. The IRS uses the term "combined income" when figuring whether your benefits are taxable. Combined income is defined as one-half of your Social Security benefits plus your adjusted gross income — including 403(b) distributions — plus any nontaxable interest. As of 2015, if your combined income exceeds $25,000, or $32,000 if married, you may have to pay income taxes on some benefits.