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Depending on the types of retirement benefits you receive, they could be taxable. Here are some basics:

Fully Taxable Payments
The pension or annuity payments that you receive are fully taxable if you don’t have an investment in the contract because:

  • You didn’t contribute anything to your pension or annuity
  • Your employer didn’t withhold contributions from your salary
  • You have received all your contributions tax free in prior years

Partially Taxable Payments
If you made after-tax contributions to your pension or annuity, your pension payments are partially taxable. You don’t pay taxes on the portion of the payment that’s a return of the after-tax amount you paid.

Additional 10% Tax on Early Distributions
Receiving pension or annuity payments before age 59½ may subject you to an additional 10% tax on early distributions. The additional tax doesn’t apply to the portion of a distribution that is tax-free or distributions made:

  • As a part of a series of substantially equal periodic payments beginning after your separation from service
  • Because you’re totally and permanently disabled
  • On or after the death of the plan participant or contract holder
  • After your separation from service and in or after the year you reached age 55

* This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS.gov
https://www.irs.gov/taxtopics/tc410

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