How is a Pension Taxed During Retirement Amherst, NH Resident Has Questions

Pensions are a great employer sponsored way to fund retirement. These typically provide monthly payments once you retire, making for an excellent source of income in your golden years in addition to other retirement savings and Social Security benefits. Your pension payments are taxed based on the rules of the state where you live, not where the money was earned. Each state has its own tax rules surrounding pension taxes. The rate of tax that you pay on this money will also vary from state to state, with some states charging taxes on pension income for earners above a set adjusted gross income only. One of the big advantages for residents of New Hampshire, as well as a handful of other states, is that the money from your pension is not taxable.

An Amherst resident was excited to retire from her job with an employer sponsored pension. Not wanting any surprises when it came time to receive the money, she contacted the team at Merrimack Tax Associates regarding questions about how these payments would be taxed.

States with No Retirement Taxes

There are several states that do not tax retirement income, including pensions. In other cases, a state may require a tax on this money only if your income is over a certain level. New Hampshire, a state with no income tax, does not require you to pay taxes on retirement income. This includes Social Security benefits, pensions, IRAs, and 401(k) withdrawals. This is a tremendous advantage to retiring to New Hampshire, and one that can add up to some big tax savings.

In Massachusetts there is a flat rate of 5% tax on retirement income. This does not apply to Social Security benefits, but most pensions are taxable at this rate with the exception of some government and public pensions that may be tax-exempt. IRAs and 401(k) withdrawals are also taxable in Massachusetts.

Other states have their own rules and regulations for taxing retirement income. The Amherst resident was pleased to hear that the IRS would not be taking a chunk of her pension each month for taxes since she was a New Hampshire resident. She can now enjoy the quiet retired life in comfort.