I have configured an RDS Postgres micro instance for testing but am having problem connecting. I have created a security group and allow all hosts (0.0.0.0/0) by default to
This is likely caused by your outbound firewall rules. If you're behind a corporate firewall, they will often block outbound ports above a certain number. You need to setup an SSH tunnel of some kind to avoid this.
http://conoroneill.net/accessing-amazon-rds-instances-from-your-desktop/