Here Are Thirteen States That Do Not Tax Ford Motor Retirement Income

'Ford Motor 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 Ford Motor 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 Ford Motor 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 Ford Motor 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 Ford Motor 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, Ford Motor 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 Ford Motor 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, Ford Motor 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 Ford Motor 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 Ford Motor 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, Ford Motor 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 Ford Motor 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, Ford Motor 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 Ford Motor employees, and still many more that provide exemptions. It is important that Ford Motor 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/ .

How does the Ford Motor Company General Retirement Plan (GRP) structure determine retirement eligibility and benefits? As an employee of Ford Motor Company, understanding the nuances of how your credited service impacts your retirement eligibility and the types of retirement (such as Normal Retirement, Early Retirement, and Deferred Vested Retirement) is crucial. This question seeks to explore the various factors that influence benefits calculation and how employees can maximize their retirement income through contributory participation.

Ford Motor Company General Retirement Plan (GRP) Structure and Eligibility: The GRP determines retirement eligibility based on Credited Service. Employees can retire with Normal Retirement at age 65 with at least one year of service, Early Retirement from age 55 with 10 years of service, or with 30 years of Credited Service regardless of age. Disability and Deferred Vested benefits are also available under certain conditions(Ford_Motor_Company_2023…).

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Optimizing Pension Benefits: Ford employees can optimize their pension benefits by contributing to the Contributory part of the GRP. Contributions increase the Contributory benefit, which is based on Final Average Pay and credited service. Employees who contribute during their service can significantly enhance their retirement income, as non-contributory periods provide only Flat-Rate benefits(Ford_Motor_Company_2023…).

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Procedures for Filing Retirement Claims: To claim retirement benefits, employees must file an application with the National Employee Services Center (NESC). Under ERISA, employees have rights to appeal denied claims. If a claim is denied, the employee must follow the outlined appeal process, ensuring they adhere to the claims timeline(Ford_Motor_Company_2023…).

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Impact of Merged Plans on Benefits: Employees who participated in plans that merged into the GRP, such as the FERCO and Granite plans, retain their accrued benefits. These benefits are paid in addition to any GRP benefits earned after the merger. The combined benefits from the merged plans and GRP determine future pension payouts(Ford_Motor_Company_2023…).

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Retirement Payment Options: Ford offers various payment options, including monthly annuities or lump sum payouts. The decision between a monthly pension and a lump sum should consider long-term financial goals. Monthly payments provide consistent income, whereas a lump sum offers immediate access to the full pension, but may require careful financial management(Ford_Motor_Company_2023…).

What key changes to the General Retirement Plan have been enacted that may affect Ford Motor Company employees hired after January 1, 2004? Understanding how eligibility and participation differ for these employees, which might include provisions related to vesting and benefit calculations, will help them navigate their retirement planning effectively.

Changes for Employees Hired After January 1, 2004: Employees hired after January 1, 2004, are subject to different vesting and participation rules under the GRP. They participate in a separate Ford Retirement Plan (FRP), and their benefits may differ from those hired before 2004, especially concerning service accrual limits(Ford_Motor_Company_2023…).

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Impact of Employment Changes: Changes in employment status, such as rehiring or disability, require employees to update their retirement records with the NESC. Proper documentation ensures that employees' vested benefits are not affected by changes in employment, such as temporary disability or rehire after a break in service(Ford_Motor_Company_2023…).

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PBGC Insurance and Coverage: The Pension Benefit Guaranty Corporation (PBGC) provides insurance coverage for Ford pension benefits. However, PBGC has limits, especially in cases of plan termination, and not all benefits may be fully covered if the pension plan is underfunded(Ford_Motor_Company_2023…).

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Changes in Marital or Employment Status After Retirement: Retirement benefits may be adjusted due to marital status changes, such as divorce or the death of a spouse. Ford employees need to update their beneficiary designations to ensure that survivor benefits are properly allocated in case of such events(Ford_Motor_Company_2023…).

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Contacting NESC for Retirement Information: Employees can contact the National Employee Services Center (NESC) at 1-800-248-4444 or through the myfordbenefits.com website for assistance with retirement planning, benefits claims, and other pension-related inquiries(Ford_Motor_Company_2023…).

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

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