New pension tax surprises retirees, creates confusion The Detroit News detroitnews.com
Michigan's tax on pensions and retirement accounts kicked in on Jan. 1 and, not long after that, Jack Vassallo kicked back.
When the retired chemical engineering technician got his monthly payment from his Fidelity Investments 401(k) retirement savings account, the check was short. The $87.43 withheld for the new state tax would have made the check the right amount — except that Vassallo is 79 years old and exempt from the retirement levy.
"I was furious," says the Woodhaven retiree. "It really irked me."
If they're not irked or furious, Michigan retirees are likely confused or unaware that the state now gets a cut of their nest eggs. Nearly 400,000 retirees face the new tax, and they'll need to make sure they're having the right amount withheld, or they could face tax penalties. And those who don't have to pay the tax — such as Jack Vassallo — need to file a form with their pension plan or investment company if they want their retirement checks to keep coming untouched.