Dumb Question About Pensions

[Julia M]

I'm not exactly close to retirement yet, but on the other hand, dh and I are really beginning our planning in earnest.

We are in the very fortunate position of having 2 pensions. In trying to figure out budgets and what is the actual amount we'll take home , I'm trying to learn what is taken out of pension payments.

Of course, right now, in addition to state and federal taxes, there is money taken out for social security, Medicare, etc.

Is anything taken out of pension checks? Do you still pay all those things?

Thanks.

 

[tina.tina]

State employees in Virginia have the opportunity to have their health care premium deducted from their pensions- also to continue optional life insurance. Are you wondering about something in particular?

 

[mom2alix]

You pay income tax, but FICA is not deducted from retirement checks.

 

[DonnaL]

Federal taxes are owed, however, as far as state taxes, it depends on the state you reside. Some states do tax pensions, other do not. FICA as another poster stated is not deducted. The amount of federal taxes owed depend on what tax bracket you will be in.

 

[tvguy]

Another issue is, how big the pension and other retirement income is. In 28 years of retirement my mom only had income high enough to require her to file a tax return one year, when she sold some stock and had Captial Gains.
You don't want tax withholding if you aren't going to have enough income to file, because then you have to file just to get a refund of the money withheld.

 

[MrsPete]

Another question: How strong is your pension? Lots of pensions have gone belly-up, leaving people in the lurch. I am a few years away from my pension, and I am concerned about this possibility.

Do not put yourself in a position where your pension is your only retirement income.

 

[BWV Dreamin]

Another question: How strong is your pension? Lots of pensions have gone belly-up, leaving people in the lurch. I am a few years away from my pension, and I am concerned about this possibility. Do not put yourself in a position where your pension is your only retirement income.

There is a pension insurance fund that protects those who's pension fund goes bad. So I wouldn't worry too much.

 

[BWV Dreamin]

Another question: How strong is your pension? Lots of pensions have gone belly-up, leaving people in the lurch. I am a few years away from my pension, and I am concerned about this possibility. Do not put yourself in a position where your pension is your only retirement income.

You can not withhold contributions to a pension. If your employer has one usually all employees have to contribute to it. It is a fixed amount. You have no option as to how much you want to contribute. Are you thinking if a 401k?

 

[njmom47]

There is a pension insurance fund that protects those who's pension fund goes bad. So I wouldn't worry too much.

I hope this is true. I am entitled to a pension from my former job (union) and I really hope the fund is still around when I retire!

 

[mnrose]

Pension benefits are "guaranteed" but there is a cap on the amount, which may or may not be the same as under the pension plan. Also, the PBGC (the guarantor) is running a MAJOR deficit....and the only way to make that up is for the taxpayers to pick up the tab (don't hold your breath) or for benefits to be cut. It is about as secure as Social Security. If you think that's secure enough, then so is your pension.

 

[Julia M]

Thank you for the replies. Kind of feeling like a fool that I asked, but so much is withheld from paychecks today....it seems hard to imagine the only withholding would be state and federal tax!

 

[crjack]

Pension benefits are "guaranteed" but there is a cap on the amount, which may or may not be the same as under the pension plan. Also, the PBGC (the guarantor) is running a MAJOR deficit....and the only way to make that up is for the taxpayers to pick up the tab (don't hold your breath) or for benefits to be cut. It is about as secure as Social Security. If you think that's secure enough, then so is your pension.

This is very true. My father's pension was picked up by PBGC and his capped amount every month is significantly less than was expected after 40 years of service. I'm just grateful that he gets anything after contributing for so long.

Fortunately he budgeted wisely his whole life because his insurance, etc that he was expecting in retirement also changed and his monthly expenses are higher.

I believe Mrs. Pete was also making the point that it's important to have some savings outside of your pension because no one can assume theirs is immune from change.