If you are planning on retiring in Maryland, do NOT rollover your employer sponsored retirement plan, 401k, 403B, 401a, 457, and TSP unless you want to pay more in tax.
And when I say more in tax, I mean much, much more.
Maryland tax law allows you to exclude $29,900 from your employer sponsored plan once you are over 65 years old, per taxpayer. Which means a married couple could exclude nearly $60k from taxable income.
Maryland also excludes your entire Social Security income from taxes too. So if you plan right you could have around $100k income, or more, TAX FREE in the state of Maryland.
Yet if you make the common mistake by rolling over your employer plans to iras you are going to pay a lot more tax. Not good!
The easiest thing retirees can do to live comfortably in retirement is to control their expenses. One of the largest expenses is taxes. So, reduce your taxes and you have less income needs to pay the bills.
How do you reduce taxes? Well, in Maryland, it’s not to have taxable income by rolling over your employer plan to an IRA.
I’ve linked to the state document which discusses the Maryland Pension Exclusion. Now, this does not say explicitly the Thrift Savings Plan is exempt. But given it is an Employer sponsored retirement plan, i.e, a qualified retirement plan, I feel rather safe saying the TSP falls under the Maryland Pension Exclusion rules.
These rules do explicitly state that IRAs do NOT qualify though. Could not be any clearer.
IRA = bad in Maryland for tax.