Q. I plan to retire within the next year but have some questions. I am a CSRS-Offset with 34 years of employment. I understand that after I start receiving the payments Social Security will not be taken out. Does that also include Medicare and state withholding taxes? So, if my annuity estimate states that I will receive $2,700 per month, is the only deduction I will have off of that my insurance if I choose to continue it? Also, if you deduct the withholding of Medicare and state taxes, will I be able to get them back when I file for my income taxes? Do I have to claim this retirement money as income on my taxes?
A. No, Medicare won’t be deducted from your annuity because it is only taken from employee salaries. Yes, you will have deductions taken out for FEHB and FEGLI unless you decline to continue that coverage. State taxes will only be deducted if you ask to have that done. However, unless you specify a monthly withholding rate or amount, the Office of Personnel Management will withhold federal income tax as if you are married and claiming three allowances. While you can elect not to have any federal tax withheld, you may be penalized by the Internal Revenue Service if you don’t have at least 90 percent of your yearly tax liability either withheld from your salary or annuity or made via quarterly payments to the IRS.
