Choosing which state to retire in can be a complicated issue. Different states may offer one or more benefits not offered by another. At the same time, the value of those benefits may be undermined by other retirement policies. In this sense, Pennsylvania offers some tax breaks for retirees that are quite competitive. Alternatively, exemptions for military retirees are rather run of the mill and common to a multitude of other locales.
Pennsylvania is one of 10 states in the United States that exempt retirement pension income from state income tax, as long as "you retire and receive distributions from a PA qualified pension plan by either meeting a years of service or age requirement in the plan," according to the Pennsylvania Department of Revenue.
Federal law requires states to exclude military pension income from taxation if they exclude other federal and state pensions. Some states offer increased benefits for their military retiree residents. Pennsylvania does not. Because it exempts the other categories of pensions, it simply follows the national requirement in relation to military pensions and does not tax "any military retirement pay."
State Employee Retirement System
In June 2010, the state legislature of Pennsylvania passed a slight pension overhaul. The changes increased the funding for educational workers throughout the state. The money was intended to ease the state's ability to distribute pensions to those workers and to fix some of the systemic problems that complicated the pension structure during the previous several decades.