Welcome to another edition of the Highball Advisors Railroad Retirement Whiteboard. I'm John McNamara from Highball Advisors, and today we'll discuss the optimal claiming strategies for starting your railroad retirement. Specifically, we'll focus on railroaders with less than 30 years of service who are considering retirement at 62. Whether you're leaving the railroad or transitioning to another career, let's explore the top 10 reasons to commence your railroad retirement before turning 70.
If you're facing health challenges or have family members with significant health issues, it's advisable to start your railroad retirement sooner to ensure financial support when needed.
Claiming Survivor Benefits:
Initiating the survivor annuity can be beneficial if you have lost your spouse. By starting the survivor benefit while your railroad retirement continues to grow, you can optimize your financial situation. Alternatively, if you have passed, your surviving spouse can initiate the railroad retirement survivor annuity while their social security benefits increase.
Maximizing Married Couple Benefits:
To maximize the benefits for a married couple, starting the railroad retirement annuity and collecting the spousal annuity can be a viable strategy. This allows the spouse with a separate career and higher social security payout to switch to their own social security benefit at the age of 70.
Deferring Taxes on Retirement Savings:
By commencing your railroad retirement, you can avoid immediate tax obligations associated with withdrawing funds from your 401(k) or similar retirement accounts.
Preserving Inheritance for Beneficiaries:
If your goal is to leave a legacy for your beneficiaries, starting your railroad retirement and relying on it for living expenses can help preserve your accumulated wealth.
If you require a steady income stream upon retirement, initiating your railroad retirement will provide the necessary financial support.
Commencing Retirement before 70:
It's important to note that there are no tier two delayed retirement credits in railroad retirement. While your tier one payout increases by 8% each year after reaching full retirement age, your tier two portion remains static. Waiting from 67 to 70 means missing out on three years of tier two benefits, making it generally unwise to delay retirement past full retirement age for railroaders with tier two benefits.
Investing for a Higher Return:
Some individuals may choose to start their railroad retirement and invest the funds themselves, seeking higher returns through ventures like rental income properties. However, careful consideration and detailed analysis are crucial before pursuing this strategy.
Private Health Insurance Funding:
If you need to cover private health insurance costs before Medicare eligibility, starting your railroad retirement can provide the necessary funds. This is particularly relevant if you have a preexisting condition and require comprehensive coverage.
Retiring in a Down Market:
Retiring during a market downturn presents the risk of selling assets at lower values. In such cases, starting your railroad retirement can ensure a reliable cash flow while avoiding the need to liquidate investments during unfavorable market conditions.
These top 10 reasons demonstrate the advantages of initiating your railroad retirement before the age of 70. It's important to carefully evaluate your unique circumstances and consult with professionals to make informed decisions. If you're nearing retirement, consider these factors and the potential risks involved. Stay updated by subscribing to our YouTube channel and sharing this valuable information with your fellow railroaders. Stay safe, stay on track, and take care. Goodbye for now!
Disclaimer: This article is provided for general information and illustration purposes only. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, or investment advisory services. Highball Advisors encourages you to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. Reproduction of this material is prohibited without written permission from Highball Advisors, and all rights are reserved from Highball Advisors, and all rights are reserved.