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Reply to "Basis for FERS-FRAE contribution?"
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[quote=Anonymous][quote=Anonymous]It isn't that the contributions themselves are taxed. It is that you are paying the contributions with money that has already been taxed (your salary). Like buying a bagel or a movie ticket or anything else. When you get paid at retirement, a portion of that retirement payment is non taxable because you have already paid tax - not on the contribution directly, but on the salary dollars you used to make the contributions. Just like buying a stock in a normal taxable account, you only pay tax on the gains. If you stay for many years, the pension will be nice, though not amazing and not as nice as it could have been had you only paid 0.8 percent of it. If you end up leaving before five years, you can get all your contributions back with interest. [/quote] Oh ok, that makes sense! [/quote]
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