A 30-second read by Nicholas Scheibner: As public employees for the great state of New Jersey, there are some important factors to consider when it comes to your retirement income.
Regarding Your Pension:
New Jersey Pensions fall into two categories: “I contribute to my pension” or “I do not contribute to my pension”
- For those employees who say, “I do not contribute to my pension” the entire portion of your pension in retirement will be taxable to New Jersey.
- For those employees who say, “I do contribute to my pension”, when you retire, a portion of your pension will be taxable and a portion of your pension will be excluded from New Jersey state tax. Note: This is the reason your gross income is higher on your New Jersey tax return if you contribute to a pension. The federal government allows pension contributions to be deducted, but NJ State does NOT allow your pension contributions to be deducted.
Regarding Social Security:
Your Social Security may be greatly reduced if you have only worked as a public employee your entire life. The calculated estimates can be difficult, so it is important to speak with your financial planner about the possible impact a pension may have on your social security income.
As always, if you have any further questions, don’t hesitate to contact the Baron Financial Group team.