Ah, defined benefit plans… We’re nearing an age when these will be gone entirely in the United States. A vast majority of American workers don’t have pensions and will not receive a pension by the time they retire. Instead, more and more companies are offering their employees 401(k) plans, save for a handful of industries such as teaching, nursing, protective services, and a few others.
What about those who will still receive them? What can they truly expect from Uncle Sam come tax season? Most states tax at least a portion of income from private-sector defined benefit plans. So, obviously, depending on where you live you might want to rethink exactly how much money you’ll have in your wallet every month during your golden years.
You might, however, be one of the lucky ones that live in a state that has pension exclusions. These come in various shapes and sizes and depend on both your income and your age. If you’re really, really lucky though? Then your state won’t tax your pension at all! If you think you might struggle in the financial department by the time you retire you might consider downsizing and relocating to one of these states.
Finally, let’s look at the 14 states that don’t tax pension income so that you can enter your golden years by making informed decisions about your savings and retirement income.