Do 457b distributions count as income for social security benefits reduction?

Yes, 457b distributions absolutely count as income for social security's earnings test when you're receiving benefits before your full retirement age. This is because the Social Security Administration looks at your "combined income" which includes wages, self-employment earnings, and other taxable income like retirement plan distributions. When you take distributions from your 457b plan, they count toward the annual earnings limit. For 2025, if you're under full retirement age for the entire year, your benefits are reduced by $1 for every $2 you earn above $21,840. In the year you reach full retirement age, the reduction is $1 for every $3 above a higher limit (around $57,960 for 2025, but check the exact number on ssa.gov). Remember though, this reduction isn't permanent. Once you reach full retirement age, your benefit will be recalculated to give credit for months where benefits were withheld due to excess earnings.

I was in almost this exact situation a couple years ago and it caused me TONS of stress trying to figure everything out. After getting conflicting advice, I finally used https://taxr.ai to analyze my social security statement and 457b plan documents together. It showed me exactly how the distributions would impact my benefits and even calculated different withdrawal scenarios. The tool confirmed that my 457b distributions would count as income for social security's earnings test, but it also showed me how to optimize my withdrawals to minimize the reduction. You upload your statements and it gives you personalized analysis that's super clear. Totally worth it to get accurate info rather than guessing or getting conflicting advice like I did initially.

Just wanted to follow up here. I decided to try taxr.ai after all and I'm really glad I did! I was confused about how my 457b distributions would affect my social security since I'm also 64 and taking benefits early. The analysis showed me that I was about to make a mistake that would have reduced my SS benefits by almost $3,800 this year! It gave me a clear breakdown of the earnings test thresholds and showed how to time my 457b withdrawals to stay under the limits. What surprised me most was learning that certain months matter more than others in the year I reach full retirement age. Now I have a month-by-month plan for the next two years that maximizes both income streams. Definitely recommend if you're trying to figure out this complicated stuff!

If you've been calling the Social Security Administration trying to get answers about your 457b distributions, you probably know it can take HOURS to get through. When I was figuring this out last year, I kept getting disconnected after waiting 45+ minutes. Then I found https://claimyr.com which got me connected to a live SSA rep in under 20 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c They somehow hold your place in line and call you back when an agent is available. I was super skeptical, but I was able to ask specific questions about my 457b distributions and how they'd affect my early social security benefits. The agent confirmed that yes, 457b distributions count toward the earnings test and gave me the exact formula they use. Saved me hours of frustration and helped me plan my withdrawals correctly.

I need to apologize and correct myself here. After my skeptical comment, I decided to try Claimyr anyway since I was getting nowhere with SSA on my own. It actually worked exactly as described. I got a call back in about 15 minutes, was connected to an SSA representative, and got clear answers about my 457b distributions. The agent explained that my 457b withdrawals would indeed count toward the earnings test limit and could reduce my benefits until I reach full retirement age. She even calculated a specific example for my situation. I wasted literally days trying to get this information before, so I'm genuinely surprised and impressed. Sometimes it's worth admitting when you're wrong!

Something that nobody has mentioned yet - be careful about the TIMING of your 457b distributions. I learned the hard way that if you're under full retirement age for the whole year, SS doesn't care WHEN during the year you receive the income. But if you reach full retirement age during the year, only income earned before the month you reach FRA counts. So if your FRA is in November, and you take a big 457b distribution in December, that amount won't count against your SS benefits. Wish I'd known this before taking a huge distribution in January of the year I reached my FRA!

dont forget that 457b money is also taxable so youll have to pay income tax on it too, not just worry about social security. i took mine out last year and got hit with a bigger tax bill than i expected. if you can spread it out over more years thats usually better for tax purposes.

This is such a complex situation and I'm dealing with something similar. I'm 63 and considering taking SS early next year while also needing to start my 457b withdrawals. After reading all these responses, it sounds like I really need to map out the timing carefully. One thing I'm still confused about - if the 457b distributions push me over the earnings limit and my SS benefits get reduced, does that mean I permanently lose that money or do I get it back later? I think someone mentioned it gets recalculated at full retirement age, but I want to make sure I understand this correctly before making any decisions. Also, has anyone here worked with a tax professional who specializes in retirement planning? My regular accountant doesn't seem to know much about how 457b plans interact with Social Security, and I'm worried about making expensive mistakes.

I just went through this exact situation last year at 64, so I can share what I learned. Yes, 457b distributions absolutely count as income for the Social Security earnings test - this caught me off guard initially because I thought only wages counted. The key thing to understand is that it's not just about whether you go over the limit, but HOW MUCH you go over. For every $2 you earn above the annual limit (which was $22,320 in 2024), they reduce your Social Security benefits by $1. So if you're planning to take out a large lump sum from your 457b, it could significantly impact your benefits for that year. What helped me was creating a monthly budget that included both my expected 457b withdrawals and the current earnings limit. I ended up taking smaller, more frequent distributions rather than one big withdrawal to stay under the threshold. Also, don't forget that these distributions will be added to your other income for tax purposes, which could push you into a higher tax bracket. The good news is that any benefits you lose due to excess earnings aren't gone forever - they get added back to your monthly benefit when you reach full retirement age. But if you need that money now for living expenses, the temporary reduction can still be a real hardship.