"Something should be done about the double-taxation of federal retirees," writes Dorothy C. Beltrone, a longtime federal worker. "Every pay day $61.26 is taken out for my retirement. I pay federal taxes on this money. When I retire and get my pension I am taxed on my retirement money.

"If we have to pay taxes on the money taken out for retirement {and} pay taxes on it again when we retire, this money should be tax-deductible on our income tax," she says.

Her letter could have been written by almost any of the nearly 2,000 federal workers who retire each month here.

After retiring, they are notified they can elect to take a lump-sum payment in two parts.

Locally it is about $30,000. It is an amount identical to what they contributed to the civil service retirement fund, and paid taxes on, while working.

Then the retirees learn that 85 to 95 percent of their lump-sum payment will be taxed as part of gross income in the year received.

The government says this is proper because only a small portion of the lump-sum payment and the actual annuity itself represents the retirees' previously taxed contributions.

Most workers and retirees see it another way. They call it double taxation.

The issue is now before the U.S. Claims Court.

Many workers and retirees hope the government loses so that lump-sum payments will become tax-free. But the government doesn't plan to lose. And in any case, it could be three to five years before the case is finally decided in the courts.

Meanwhile, if you are planning to retire in the next few years, be prepared to pay the taxes.

Unfortunately, each month many of the new retirees learn about the lump-sum taxation issue for the first time.

Some don't become aware of it until they take the lump sum, spend it and then discover to their horror that they owe a whopping tax bill on money they no longer have.

Financial planners say that as a general rule people who retire at age 55 or younger should take the lump sum.

Those between ages 55 and 65 need to examine their situations -- financial needs, debts and work plans -- very carefully.

Those who are 65 or older generally should not take the lump sum, experts say. But there are exceptions to each rule.

On Saturday on WNTR radio (1050 AM), financial planner David Cohen will talk about the financial pros and cons of taking the lump sum depending on the retiree's age, health and financial situation.

Mr. Productivity

The General Accounting Office's Brian L. Usilaner has moved into the private sector after 25 years with the congressional watchdog agency.

He is the senior vice president for quality research at Sirota & Alper, an international opinion research firm here.

He had specialized in federal productivity and quality control.


I'm taking off a few days. I'll be back in this space next week.