Re: Just clarify statement about tax exemptions

I am not aware of any American state in which you can avoid paying federal income taxes (without going to jail). The phrase you referenced means that federal pensions (such as your federal retirement annuity) is exempt from state taxes--and state and local government annuities are also exempt from state taxes. Uncle Sam will still get a chunk.

Re: States that do not tax federal pensions

Florida is listed in a separate paragraph because it recently altered its income tax provisions as a result of the effort by Gov. Jeb Bush to get rid of some of the income tax provisions it previously had. Texas is listed in the article as a state with no personal income tax ("Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming do not have a personal income tax.") In two separate research services, Texas is listed as a state that does not tax military retiree pay but it is not listed as a state that completely exempts pension income from taxes. That is why it was not listed among the other states included. Rather than hold up the article to research the Texas code, I did not include it as it probably has a provision that taxes some part of pensions under some circumstances. I did not want to mislead any readers and did not intend the article to be an exhaustive discussion of the ins and outs of the pension tax laws in all states.

Re: OCONUS Retirement

Good Question. Please write an article about living abroad after retirement ... how does it affect your retirement savings ... how does one cash-out TSP monies, receive CSRS/FERS pension payments, handle taxes by the US versus foreign Country's taxes/fees? Can you live near a US embassy and use the same medical services they do to use your FEHB during retirement?

Re: Best Retirement States for Tax Purposes

Which list did you think it should be included on? There were a number of states not mentioned in the article because they have an income tax and also tax pension income. DC has an income tax and it also taxes pension income so it was not on those list of states. It's overall tax burden is among the highest in the country but it came in at number 6 overall so it did not make the list of the top 5 highest states. Washington, DC has many advantages but it is among the most expensive places to live for a retiree and the focus of the article was on the states with the best overall tax situation for retirees.

Re: Tax on retirement

According to several sources, including the retirement living information center, in Hawaii Social Security, military, federal, state/local, and some private pensions are exempt from state taxes as is military retiree pay. The National Conference of State Legislatures also notes that "Ten states exclude all federal, state and local pension income from taxation...." including the State of Hawaii. (http://www.ncsl.org/programs/fiscal/pitaxret07.htm)

As noted in the article, state legislatures can change tax laws at their discretion. Hawaii places a very high tax burden on its citizens and housing costs are very high. But, if it has enacted a change to tax pensions of federal employees, it has been changed in the past several months.

Re: Taxing Retirees

If you are an American citizen, you have to pay federal income taxes. Federal pension income is exempt from state taxes in some states; the federal government expects you to pay taxes to it regardless of which state you live in.