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Pensions, annuities, rental income and other unearned income are income streams with Earned income unchecked. Taxable categories enter federal and state income tax, and none is subject to payroll tax. The tax category you choose decides whether it counts toward the net investment income tax and how some local taxes treat it.
Timing works as it does for wages. Growth doesn’t: an unearned income with a blank Growth rate never grows.
For a qualified pension, choose a Benefit formula: flat annual benefit, final average pay or career average pay. Salary-linked benefits multiply the selected average nominal salary by service years and Benefit percent per service year. Service accrues by active salary months before pension payments start. Final average pay uses the last selected number of calendar years with service, weighted by active months; career average pay weights all modeled service.
Service years before plan use the salary’s plan-start pay where earlier pay is unknown. Flat annual benefit is entered in today’s dollars and follows plan inflation until payments start. The annual benefit freezes at commencement; Pension COLA applies afterward. Blank Pension COLA means no increase. Formula benefits ignore the stream’s Growth rate and Growth cap.
Set Payment frequency to Once and enter the full payment in the annual entry unit. The full amount arrives in the start month, with growth from plan start until payment. Recurring payments can Repeat every (years), counting from the first active calendar year. A one-time bonus or RSU vest uses employment income and incurs wage and payroll taxes. Later share-sale gains are outside this income stream.
Add the income with the Other income type and choose an Income tax treatment. The form requires a choice. The amount, frequency, recipient, milestones, months and withholding work as they do for a salary; see Wages, raises and work income.
Social Security has its own income type, claiming age and taxation rules; see Social Security benefits. An older unearned income saved without a category keeps the investment-income treatment until you choose one, and the projection shows a warning.
| Income tax treatment | Typical income | Net investment income tax |
|---|---|---|
| Nontaxable cash receipt | Cash gifts, after-tax inheritances and generally life insurance death proceeds | Excluded |
| Qualified pension or retirement distribution | Employer pensions and payouts from workplace retirement plans | Excluded |
| Nonqualified annuity taxable income | The taxable part of an annuity bought with after-tax money | Included |
| Investment income | Net rental income, royalties, interest received outside an account | Included |
| Other ordinary income excluded from NIIT | Unemployment benefits, taxable alimony, other taxable income | Excluded |
Taxable categories enter ordinary income. Nontaxable cash receipts enter cash flow only. None is subject to Social Security or Medicare tax.
Investment income entered here is taxed at ordinary rates, not at the rates for qualified dividends and long-term gains. Dividends and gains from accounts you track are figured separately; see Capital gains, dividends and investment taxes. Rental income is investment income for the net investment income tax unless the rental is a trade or business you work in.
Some local taxes read the category. Michigan city income taxes exclude pension and annuity income. Philadelphia’s school income tax applies to investment income and annuities. Local taxes on earned income ignore all four categories. See State and local income tax.
For unearned income, a blank Growth rate and 0 both mean the payment is fixed in nominal dollars. Unlike wages, a blank rate doesn’t follow inflation. For a pension with a cost-of-living adjustment, enter its COLA as the Growth rate. A Growth cap limits a COLA that stops at a set payment.
| Quoted first-year payment | $30,000.00 | |
|---|---|---|
| ÷ | 1.02 raised to 15 years (2026 to 2041) | 1.3459 |
| = | Amount to enter | $22,290.44 |
| → | Paid in 2041, July through December | $15,000.00 |
| → | Paid in 2042, after one COLA | $30,600.00 |
Plan starts January 2026; the plan owner was born in July 1976, so the age-65 milestone is reached in July 2041. Entering $30,000 with a 2% rate would pay at $40,376.05 a year in 2041 instead.
A pension usually starts at a milestone. In that year, payments begin in the Start month, or in the month the milestone is reached. Age milestones use the plan owner’s age. For a partner’s pension, use a date milestone, or a milestone set to the plan owner’s age in that year.
Every income stops when its recipient dies. CoastMath has no joint-and-survivor option for a pension or annuity. To model a survivor benefit, add a second income owned by the survivor, starting at a date milestone for the year the benefit would begin. See When a partner dies for when each person’s income ends.