Q. I will be 62 years old in November 2010. I plan on retiring Dec 31, 2010. I will draw a FERS annuity from the government; I also will be drawing Social Security. My question is, will my FERS annuity be considered taxable income to Social Security and will my Social Security benefit be taxed for it ?
A. Your FERS annuity will be taxable as regular income; however, a portion of it will be tax-exempt because it represents a return of the contributions you made to the retirement system, which have already been taxed. When determining if you have exceeded the Social Security earnings limit, the Social Security Administration only considers earnings from wages or self employment; in other words, earnings from which Social Security deductions are taken. The amount of your Social Security benefit that will be considered taxable will depend on your benefits and the total of your other income.