Well it’s the new year and people are inundated with articles and blog posts about things you can do to save money in the upcoming year. They usually require some sort of lifestyle sacrifice to accomplish your financial goals. While it is important to look at your spending habits not only annually but continuously, I wanted to provide some tips that railroaders can do that don’t require drastic spending change. However if you are looking for my thoughts about spending you should check out my “Ford v Railroad Retirement” video on my Youtube channel. Here are three free ideas for railroaders to grow your railroad retirement that don’t require any financial sacrifice to accomplish.
Stay in the Game
There is massive change occurring in Class 1 railroading currently. Precision Scheduled Railroading (PSR) has taken grip of the industry and it isn’t going to stop for the foreseeable future. The stocks of railroad companies are performing to well to reverse course right now. Railroads are getting rewarded by the markets for implementing PSR. However we know PSR has meant drastic layoffs and job cuts. Upwards of 10% of Class 1 railroad employees have been let go. However if you survived and are still employed by the railroad then you should be focusing on maximizing your railroad retirement. The growth in your retirement income from collecting Tier 2 benefits is tough to be duplicated outside of the railroad industry. Every year you continue to work for the railroad your Tier 2 benefits will be growing. The same can’t be said for workers who rely just on their 401k. The markets can and will be fickle. While the trend over time will always be in the positive direction it will have corrections. Tier 2 provides railroaders year on year growth in retirement income that is tough to duplicate outside of the railroad industry. For example, let's assume you have worked for 10 years in the railroad and you are thinking of leaving. If you worked another year in the railroad then your Tier 2 benefit for you and your spouse would grow by 9%. I don’t know where anyone can go and get 9% risk free return of retirement income. Staying with the railroad, you can grow your railroad retirement with no risk to your portfolio. The challenge unfortunately is to be able to stay in the industry to take advantage of the retirement benefits.
Invest Like a Railroader
As I outlined above, you have a powerful retirement income stream when you leave the railroad. Most railroaders will have their Railroad Retirement benefits and a 401k. Some will even have a pension in retirement. Railroaders would be advised to use their guaranteed retirement streams from their Railroad Retirement benefits when deciding on their investment strategies for their 401ks and other retirement vehicles, i.e. IRAs, Roth IRAs, etc. The typical non-railroad worker funds their 401k for retirement and then at retirement realizes they need income to supplement their Social Security. Most will purchase an annuity to get that retirement income. Some will do other very conservative strategies like purchase CDs from their local bank or bond ladders. However railroaders have been funding their retirement income stream throughout their careers by paying into the Railroad Retirement Board and receiving Tier 2 retirement income. By doing this railroaders are now afforded an opportunity to position their 401k for maximum growth. They are no longer saddled with the need to dedicate a portion of their 401k to purchasing retirement income investments,i.e. Annuities, CDs, etc.. So instead of moving your 401k into a very conservative investing model as retirement nears you can still position your retirement assets for growth. Fully understanding the opportunities of the Tier 2 retirement income on your retirement is a valuable concept to comprehend. It is also free and just requires you to understand how to position your retirement assets to take advantage of your Railroad Retirement benefits.
Who doesn’t love a good double negative to start the day? The reality is most railroaders don’t give much thought to retirement until they are about to retire. Even when they believe they are a prepared there isn’t really a plan behind it. They just know that they are expecting this dollar amount every month in retirement. Well that isn’t a plan. So I would implore all railroaders to start educating themselves about their railroad retirement. There are so many opportunities to take advantage of and by having a strategy in place you can maximize your hard earned railroad retirement. There are many resources out there for you including the Railroad Retirement Board website or check out my videos and blog articles to get ideas. All free resources to you to help educate so you can enjoy the fruits of your labor.
Hopefully these three free ideas will get you thinking about putting together a retirement plan for you and your family. If you would like to assistance in planning for your retirement, please schedule a free 30 minute meeting with me.
Photo by Craig Walker
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.