Here Are Thirteen States That Do Not Tax Citigroup Retirement Income

'Citigroup employees choosing their retirement relocation options should also take into consideration the tax issues of the state where they plan to retire, as this will have a great deal of impact on their retirement finances in the long run,' advises Paul Bergeron, a financial expert at The Retirement Group, a division of Wealth Enhancement Group.

'Selecting a retirement destination is based on more than just climate preferences; tax effects on your retirement benefits are an important factor in consideration,' says Tyson Mavar, a representative of The Retirement Group, a division of Wealth Enhancement Group, advising Citigroup employees to thoroughly research state tax regulations.

In this article, we will discuss:

Tax Variations by State: Information on how states tax retirement income, including 401(k) distributions and IRA withdrawals, is important for Citigroup employees making plans for their retirement destinations.
State-Specific Tax Exemptions: Emphasizing the states that do not impose taxes on retirement income, with examples of the states that do not have state income tax or exempt pension from tax.
Other Factors: Other financial factors like property and sales taxes and how these affect other aspects of life when choosing a retirement location are discussed.

It is very important for the Citigroup employees who are planning on retiring to realize that the large majority of retirees will have to make the decision of where to spend their retirement years. It is crucial to understand the cost of living in different areas and, depending on where you live, you might have to pay different taxes. It is important to note that states tax retirement income like 401(k) distributions and IRA withdrawals differently. The following information is important for the Citigroup employees who are planning to relocate to a more tax-friendly state:

States without a state income tax:

This way, 401(k) and IRA distributions are considered as taxable income. Does this mean that there are no states in the United States that do not tax income? Fortunately, Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming are included in the list of states that do not tax retirement distributions. New Hampshire is another state that excludes retirement income from taxation; interest and dividends are taxed. Because these types and many others are among the most common types of income in retirement portfolios, those looking to relocate to New Hampshire may want to take note of this. The tax could also be avoided by a distribution. There is a distribution that would qualify as income and therefore would not be taxed by New Hampshire if the income-generating assets were held in a tax-advantaged plan.

States that don’t tax pension income

In addition to traditional income tax withholding states, Citigroup employees and retirees should look at the number of states that don’t touch retirement income. The following four states do not tax retirement income; the following information is pertinent.

Illinois Illinois has a flat state income tax of 4.95% and exempts from taxation nearly all retirement income, including Social Security retirement benefits, pension income, and retirement savings account income. Sales and property taxes are also through the roof, so if you’re retiring from Citigroup and thinking of moving to Illinois, you should know this is one of the nation’s highest taxed states. The Illinois state sales tax rate is 6.25%, and local governments can levy another 5.25% on top of that. The Tax Foundation says this is an average combined rate of 8.73% in this state. The median property tax rate is also quite high at $2,073 per $100,000 of assessed property value per individual.

However, Citigroup retirees are allowed a homestead exemption of up to $5,000 ($8,000 in Cook County and beginning in 2023, in neighboring counties as well). A person must be 65 years of age or older and meet certain other qualifications to qualify for these exemptions. Seniors with a household income of $65,000 or less can have the assessed value of their property frozen. In addition, qualified residents aged 65 or over with a household income of $65,000 or less can defer property tax payments of up to $7,500. Cities, villages, or incorporated towns may also refund property taxes paid by certain senior citizens, 65 years of age or older.

Iowa

A new law that will take effect in 2023 will exclude all individuals over 55 years of age who retire and move to any of the Citigroup companies and relocate to Iowa from paying taxes on their retirement income. As of 2023, the income tax rate in the state of Iowa has 4.4% - 6%. It will decrease until it reaches the minimum of 3.9% in 2026. The median property tax rate in Iowa is $1,501 per $100,000 of the assessed property value.

Like Illinois, property tax exemptions are offered to senior citizens by Iowa. Homeowners and occupants 65 years of age or older are eligible for a property tax credit of up to $1,000. Effective 2022, the citizens who are 70 years of age or older and whose total household income does not exceed 250% of the federal poverty level, the credit shall be computed as follows:

Mississippi

The income tax rates in Mississippi are 0% to 5%, and retirement income is exempt from tax if the plan meets the requirements. This means that early distributions from retirement plans may not be considered retirement income and may be subject to tax and penalty for Citigroup employees. Another point of interest is that the median property tax rate in Mississippi is $753 for every $100,000 of the market value of the home. Also, seniors’ tax exemptions exist in this state as well. Property tax exemption applies to homeowners who are 65 years of age or over and totally disabled, or to homeowners who are 65 years of age or over. Also, there is no estate or inheritance tax in this state.

Pennsylvania

To understand the tax environment in Pennsylvania, Citigroup retirees should know that the state has a flat income tax of 3.07 percent. Retirement income is taxed exempt in Pennsylvania provided that plan requirements are met; however, early withdrawals from retirement plans are treated as normal distributions and may be subject to taxation. Also worthy of mention is the median property tax rate in Pennsylvania is $1,358 per $100,000 of the value of the home. An individual must be 65 or older, or be a widow or widower aged 50 or over to qualify for the Property Tax/Rent Rebate Program, which offers rebates on property taxes or rent paid. In general, the maximum standard rebate is $650, but extra rebates can bring the total to $975 for owners of property with high taxes.

The income limits are as follows: a household must not earn more than $35,000 ($15,000 for renters), but 50% of Social Security and Railroad Retirement benefit payments are not counted toward the eligibility income. Some school districts also provide property tax credits to senior volunteers. There are restrictions on who can claim the credits: age 60 or older; legal residency in Pennsylvania for at least 90 days; ownership of real property within the school district; and participation in the school district’s volunteer program.

Other aspects of retirement income tax

While the above states exclude retirement income from taxation, you may also want to check if other states offer exemptions for Citigroup retirees. Some states treat pension income differently from other retirement distributions, and others exclude military duty pay from taxation. Moreover, some countries tax Social Security benefits while others do not, and most countries do not tax these benefits at all. First, however, Citigroup retirees searching for a permanent residence must know the tax consequences of the area they choose. Other factors like sales and property taxes are also important. When considering the pros and cons, you may decide that paying a higher tax rate is worthwhile if the state offers other advantages.

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Conclusion

This paper has identified 13 states that do not tax retirement income for Citigroup employees, and still many more that provide exemptions. It is important that Citigroup employees check the tax consequences when planning to relocate to avoid surprises. It should also be noted that, while a low tax liability is desirable for a comfortable retirement, it is not the only factor to consider. If you are unsure of which state to retire in, you may want to consult with a professional. To get a free cash flow analysis and speak with a consultant who can help you determine which decision is best for you, contact The Retirement Group.

Sources:

1. Kiplinger Staff. 'Thirteen States With Zero Tax on Retirement Income.' Kiplinger , 2021, www.kiplinger.com/taxes/state-tax/603293/states-with-no-tax-on-retirement-income .

2. SmartAsset Editorial Team. 'States That Do Not Tax Retirement Income.' SmartAsset , 2022, smartasset.com/retirement/states-that-do-not-tax-retirement-income.

3. EZTaxReturn Editorial Team. '10 States That Don't Tax Retirement Income.' EZTaxReturn.com , 2022, www.eztaxreturn.com/blog/states-that-dont-tax-retirement-income/ .

4. Truss Financial Group Analysts. 'Tax Free Retirement: States that Don't Tax Pensions.' Truss Financial Group , 2021, www.trussfinancialgroup.com/tax-free-retirement-states .

5. eTaxReturn Editorial Team. '10 States That Don't Tax Retirement Income.' eTaxReturn.com , 2022, www.eztaxreturn.com/blog/10-states-that-dont-tax-retirement-income/ .

What are the main eligibility criteria for participating in the Citigroup Pension Plan, and how can Citigroup employees ensure they meet these requirements throughout their employment? Furthermore, what implications does the merger of prior pension plans into the Citigroup Pension Plan have on the benefits for employees from acquired companies, and what steps should they take to understand how their previous service is credited under Citigroup?

Eligibility Criteria for Citigroup Pension Plan Participation: Employees hired before January 1, 2007, are eligible to participate in the Citigroup Pension Plan if they were employees of a Participating Employer. Employees hired after that date are generally not eligible to participate. Additionally, employees from acquired companies may have their prior service credited under Citigroup. It's important for these employees to review the plan's specific provisions or contact the Citi Pension Center to ensure accurate service credit(Citigroup_Pension_Plan_…).

How does the Citigroup Pension Plan address survivor benefits for employees who pass away before their pension benefits commence, and what steps must their beneficiaries take to claim these benefits? Additionally, how can employees ensure that their loved ones are adequately informed about the options available should they face this unfortunate event?

Survivor Benefits for Pre-Retirement Death: If an employee passes away before benefits commence, the surviving spouse may receive a lifetime annuity based on the account balance or opt for a lump sum. Employees should ensure that their beneficiaries are aware of these options and the process to claim benefits(Citigroup_Pension_Plan_…).

For Citigroup employees wanting to learn more about the pension plan's benefits and options available to them, what contact methods should they use? How does Citigroup facilitate communication regarding the pension plan, and what are the most efficient ways for employees to get their questions answered?

Contacting Citigroup for Pension Plan Inquiries: Employees can contact the Citi Pension Center by phone at 1-800-881-3938 for U.S. inquiries or use the online portal to access their pension details. These methods provide the most efficient way to get answers to any pension-related questions(Citigroup_Pension_Plan_…).

With the current political climate we are in it is important to keep up with current news and remain knowledgeable about your benefits.

Citigroup offers both a traditional defined benefit pension plan and a defined contribution 401(k) plan. The defined benefit plan provides retirement income based on years of service and final average pay. The 401(k) plan includes company matching contributions and various investment options such as target-date funds and mutual funds. Citigroup also provides financial planning resources and tools to help employees manage their retirement savings.

Citigroup is planning to cut 20,000 jobs as part of a major restructuring effort to streamline operations and save $2.5 billion. The bank is also focusing on international growth and simplifying its management structure from 13 layers to eight. Despite the layoffs, Citigroup continues to offer comprehensive retirement benefits, including 401(k) plans and health benefits. Understanding these benefits is important in today's political environment.

Citigroup grants RSUs that vest over several years, giving employees shares upon vesting. They also provide stock options, allowing employees to purchase shares at a set price.