Are NY Teacher Pensions Taxed? What Retirees in Rye, NY Need to Know

NYSTRS pensions are taxable at the federal level, but they are fully exempt from New York State income tax. That means retirees living in Rye, White Plains, Mamaroneck, or greater Westchester County will owe federal taxes on their monthly NYSTRS benefit but pay no NY State tax on it. Understanding how this works—and how it fits with Social Security and 403(b) withdrawals—can make a meaningful difference in your long‑term tax plan.

Federal Taxation of NYSTRS Pensions

The IRS treats NYSTRS pension income as taxable ordinary income. This means:

• Your NYSTRS pension is reported on your federal tax return each year
• Withholding can be set up to avoid surprises at tax time
• Your tax bracket will depend on your total household income in retirement

For many Westchester County retirees, federal taxes are one of the key ongoing expenses to plan around, especially when combining pension income, Social Security, and investment withdrawals.

New York State Pension Tax Treatment

Here’s the good news for New York retirees: NYSTRS pensions are 100% exempt from New York State and local income tax. This applies whether you live in Rye, NY, White Plains, Mamaroneck, or anywhere else in the state.

You do not need to meet an age requirement, and there is no cap on the amount that can be excluded—it’s simply not taxed.

Social Security Tax Rules

Unlike NYSTRS benefits, Social Security may be taxable at the federal level depending on your “combined income.” Up to 85% of your Social Security benefits may be taxable if your income exceeds certain thresholds.

New York State, however, does not tax Social Security benefits at all.

Required Minimum Distributions (RMDs)

NYSTRS pensions themselves are not subject to RMD rules, but your tax‑deferred retirement accounts are. This includes:

• 403(b) plans
• Traditional IRAs
• Old 401(k)s rolled into an IRA

RMDs begin at the federally mandated age and must be taken each year, adding taxable income to your return. For retirees with large 403(b) or IRA balances, RMDs can significantly affect tax brackets in later retirement.

How 403(b) Withdrawals Are Taxed

Withdrawals from a traditional 403(b) are taxed as ordinary income in the year the money is withdrawn. This means:

• Withdrawals increase your taxable income
• They may affect how much of your Social Security is taxable
• They may impact Medicare IRMAA surcharges

Roth 403(b) withdrawals, if qualified, are tax‑free—which can be helpful for managing your tax bracket strategically.

Strategies to Reduce Taxes in Retirement

Retirees in Rye, White Plains, Mamaroneck, and greater Westchester County can use several planning strategies to help manage taxes on retirement income:

1. Roth Conversions

Converting part of your 403(b) or traditional IRA to a Roth IRA can reduce future RMDs and provide tax‑free income later. This is especially effective in the early years of retirement before Social Security begins.

2. Withdrawal Sequencing

The order in which you draw income—NYSTRS pension first, then IRA/403(b) withdrawals, then Social Security—can significantly influence your tax bill. A thoughtful plan can help keep you in a lower bracket for longer.

3. Qualified Charitable Distributions (QCDs)

If you’re charitably inclined, a QCD from your IRA can satisfy your RMD while excluding the amount from taxable income. This can reduce both federal taxes and Medicare surcharges.

4. Comprehensive Tax Planning

Coordinating your pension, investments, Social Security, and retirement accounts is essential. Focus Financial Group offers specialized tax planning for public school retirees, helping you build a strategy that supports long‑term financial health.

How Focus Financial Group Helps NYSTRS Retirees

Our team in Rye, NY works closely with public school employees and Westchester County retirees to clarify how NYSTRS pensions interact with other retirement income sources. We also provide integrated financial planning to help you navigate taxes, investments, and long‑term income needs.

Ready for a Retirement Tax Review?

If you’re retired—or preparing to retire—in Rye, White Plains, Mamaroneck, or anywhere in Westchester County, we can help you understand how taxes will affect your pension and long‑term income plan. A thoughtful strategy can help you keep more of what you’ve earned.

Schedule a retirement tax review today.