Social Security at FRA vs delaying when contributing to Deferred Comp plan - tax implications?

This is a great question that involves both tax planning and SS maximization! Yes, contributing to your 457b plan reduces your taxable income, which can potentially keep your Social Security benefits from being taxed as heavily. But this is different from the earnings test (which doesn't apply once you reach FRA anyway). The real question is: do you need the money now? If not, delaying to 70 still gives you that guaranteed 8% per year increase from FRA to 70. That's hard to beat anywhere else. Your 457b contributions help with current tax situation regardless of when you claim SS.

my sitation was kinda similar to yours but i started taking SS at FRA even with my 403b contributions (im a retired teacher). the way i see it, bird in hand is worth 2 in bush! who knows whats gonna happen in 3 years right? plus if your investing that ss money now you could do ok depending on the market. just my 2 cents

This question requires some nuanced analysis. Your 457(b) contributions will reduce your current income tax burden, but they won't affect how Social Security calculates the taxation of benefits. Social Security looks at "combined income" (adjusted gross income + nontaxable interest + 1/2 of SS benefits) to determine if your benefits are taxable. That said, by reducing your AGI through deferred comp contributions, you might keep your combined income below the thresholds where SS benefits become taxable (below $25,000 for individuals or $32,000 for couples, benefits are tax-free; between $25K-$34K for individuals or $32K-$44K for couples, up to 50% is taxable; above those upper thresholds, up to 85% can be taxable). Waiting until 70 still provides a guaranteed 24% increase in your lifetime benefit amount compared to FRA. This is particularly valuable if you expect longevity beyond roughly age 80-83, which is typically the break-even point. Key question: What's your projected lifespan based on family history and personal health?

DONT LISTEN TO THESE PEOPLE!!! The government doesn't want you to know this but they're reducing benefits every year!! Take it as SOON as possible! My brother waited till 70 and then they cut his benefit by 12% with that Medicare IRMAA thing. TOTAL SCAM!!!

I've been navigating this exact issue! After struggling to reach SSA for weeks (constant busy signals, disconnections, 4+ hour hold times), I found this service called Claimyr that got me through to an actual person at Social Security in under 20 minutes. The agent I spoke with explained that while 457b contributions reduce your taxable income, the calculation for how your SS benefits are taxed is based on your "combined income" which includes half your SS benefits plus all taxable income. The agent confirmed what others are saying - the decision to claim at FRA vs. 70 should primarily be based on longevity expectations and cash flow needs, not tax considerations alone. You can see how they work at claimyr.com or watch their demo at https://youtu.be/Z-BRbJw3puU - saved me enormous frustration.

wait I'm confused... what's a deferred contrabution plan?? is that like an IRA?? can everyone do this to lower there taxes on social security??

I'm a retired financial planner who specialized in retirement income strategies. Here's what I'd consider in your situation: 1. Longevity - With family history of longevity, delaying to 70 has significant advantages 2. Tax brackets - Analyze your current and projected future tax brackets 3. Other income sources - Do you have enough from other sources during the delay period? 4. RMDs - Remember that at 73, you'll face Required Minimum Distributions from traditional retirement accounts One strategy worth considering: Draw down from other taxable accounts between FRA and 70 while maximizing your 457(b) contributions, then take the higher SS benefit at 70. This can create a more tax-efficient withdrawal strategy over your lifetime. The 8% annual increase from delaying past FRA is guaranteed, inflation-adjusted, and lasts for your lifetime - extremely difficult to match elsewhere, especially in a tax-advantaged way.

quick question thats related - does anyone know if u have to pay FICA taxes on social security income? i just realized ive never checked this on my tax returns

Thank you everyone for the thoughtful responses! Based on your advice, I'm leaning toward delaying until 70 while continuing to max out my 457(b) contributions and drawing from my brokerage accounts as needed. Given my family history of longevity and current good health, the guaranteed 24% increase seems worth waiting for. I'll schedule a meeting with my financial advisor to map out a year-by-year withdrawal strategy that minimizes taxes during this bridge period. Really appreciate all the insights!