Q: I was told by an administrative person some 15 years ago that your initial retirement pay is not taxed until your retirement exceeds your cumulative retirement pay-in. Is this true?
A: That hasn’t been true since the law changed in 1983. Before that time, retirees received the full amount of their retirement contributions before their annuities were taxed. Since then, a portion of each annuity payment is taxable. For information on how that amount is determined, read IRS Publication 721, Tax Guide to U.S. Civil Service Retirement Benefits, available at http://www.irs.gov/publications/p721/index.html.