FERS and Social Security taxes


Q. I am a FERS employee with DoD. I plan to retire in December 2016 at age 61. At that time I will have 35 years of service. I will be 62 in February of 2017. My high three will be about $124,000. I am trying to estimate my take-home pay from Social Security and FERS. My FERS annuity will be about $49,000 per year. My Social Security will be about $22,000 per year.
Do I have to pay federal taxes on FERS and Social Security, and state taxes (Michigan)? Social Security on the FERS annuity? Medicare on Social Security and FERS annuity?

A. To find out what the taxes will be on your FERS annuity, see IRS Publication 721, Tax Guide to U.S. Civil Service Retirement Benefits available at (www.irs.gov/pub/irs-pdf/p721.pdf). For the tax treatment of Social Security benefits, go to SSA’s Taxes and Your Social Security Benefits information page (www.ssa.gov/planners/taxes.htm). To find out how your annuity will be treated in Michigan, you’ll have to check with your state taxing authority.

Social Security deductions are only taken from earning acquired through wages or self employment, not annuities of other sources of income. Because you have already paid for Medicare Part A coverage through payroll deductions, there won’t be any further payments required unless you have earnings from wages or self employment. If you elect to be covered by Medicare Part B, you’ll have to pay the premiums for it.

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Reg Jones was head of retirement and insurance policy at the Office of Personnel Management. Email your retirement-related questions to fedexperts@federaltimes.com.

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