"...Exactly how is your retirement income taxed for federal income tax purposes? Let’s look at it one piece at a time.
Most of your CSRS or FERS pension will be taxable. You receive your already taxed contributions back without having to pay any more tax on them. Unfortunately, you receive them back over your life expectancy. For a retiree who is age 55, that is 360 months, or 30 years. The bulk of the pension you receive consists of Uncle’s contributions and earnings on both Uncle’s contributions and your contributions. Each year OPM will send you a form 1099-R which lists your total annuity, the taxable portion of your annuity, and your total contributions to the retirement fund..."
