Q. When I retire, I will be 59½ and will have 30 years of service at the Postal Service. I will not have any earned income from that point on. I understand federal and state taxes will be taken out of my FERS annuity and any money I take out of my Thrift Savings Plan. Will I also have Supplemental Security Income deducted from these two sources? Also will my special retirement supplement and, when I turn 62, my SSI benefit also be subject to federal and state taxes?
A. Deductions for Social Security are only taken out of earnings from wages and self-employment, not other income. Your special retirement supplement will be treated as ordinary income and taxed accordingly. Your Social Security benefit will be taxed only to the extent that you have other substantial sources of income.