Avoid these six pitfalls when thinking about railroad retirement,
Welcome everyone to another edition of the Highball Advisors railroad retirement whiteboard. My name's John McNamara of Highball Advisors. And today we're going to talk about you know, claiming railroad retirement, different strategies, things we want to avoid mistakes that I've seen railroaders make maybe some prejudices around their decision-making. So maybe I can shatter a few of the myths, some of the urban legends, I guess around railroad retirement.
So let me walk through these six that I've come up with for railroaders. All right. Here's some of the things that maybe change the way you want to think about railroad retirement a little bit. So first is worrying about dying, right? You say, ah, I'm not going to live past railroad retirement, you know, long Into railroad retirement. So I want to get my money back. I've paid into it all this year, right? You know, check out my video, Breaking Bad in Railroad Retirement. It goes over break, even points in Railroad Retirement. So I get that right. You've paid in a lot of money. You want your money back? I get that. But the way you want to look at railroad retirement is it's it's longevity, insurance, right? You know, you can live a long time. Sorry. If that upsets you, but there's a chance you can live a long time. I mean, medical, technology's getting a lot better. So you want to make sure your money's there. So by claiming early, you might not that money might not be enough as you get later in your later years. So think about that, right? Think of it as a longevity insurance and not so much getting your money back. So that's point number one.
Here's the second one, which is kinda funny against the first one, is waiting too, too long to claim. You'd go, John, you just told me wait. No, I didn't say it. Wait, but anyway, waiting too long to claim, right? So there's certain times when you should be claiming early, right? Maybe you have a disabled child. They can claim earlier, right? You have a minor child. They can once you start a tournament, they can get, they can get the benefits. So that's something to think about. Well, maybe you're single and poor health, right. So if you're single in poor health, well then, okay. You know, You're in poor health you know, the doctors told you you're in poror health then. Okay. I get that, get the money earlier. Right. It might not make it to breakeven.
Now I put the stop here because it, now, if you're married in poor health, well, there's another part of the equation. It's the spouse. So if you have a healthy spouse, right. It kind of reverts back up to the longevity thing, right? How is your spouse going to be taken care of? So understand what that would look like. Right? And then set your benefits to that rate. So you might have to stay longer in order to have the protection later on in life. So that's important when you think about that.
Let's move over to number three the earning limits, not working, right? Some people say, I don't want to work because then I got to give up, you know, I'm one year away from full retirement age. I got to give $1 out of every $2 and benefits. But the important thing to remember is at full retirement age that goes away.
Okay. So those adjustments are gone. So normally people who are you know, working still and, and collecting, I would keep working. I wouldn't let that distract you. So that's one of the things there, don't worry about that loss of benefits for the reduction. I should say if it's, cause it's going to adjust upward at full retirement age. So that's a good one number four, not filing for a widow/ widower benefits, right. So they can file at 60 as a widow or widower to get the to get the benefits. Right. And then there's a strategy there, right? So let's say if you're in the railroad or, and are a widow or widower, right. You can collect the widow benefits, the survivor annuity on social security and then switch later to railroad retirement at full retirement age. So there's things to think about. Remember, there's all these combinations of of railroad retirement and interchanging with social security must be over a thousand different combinations. So that's like one strategy right there. It's, if you're a widow, you know you can collect that. I mean, I have a client that does that right now. It's, you know collecting the survivor benefits, right. I'm going to wait for full retirement age and then switch, turn on the railroad retirement. All right. So that's a strategy. Think about in this case, it seemed, it's working out very well for my client there.
So that's one of the things about getting divorced, right? There's another thing to remember thinking about remarriage; you're going to lose your spousal benefits. So think about that on the remarriage depending upon what your spousal benefits are now versus what they would be with the new spouse. So that's something to think about in their number. It's the 10 years you have to be married and and obviously deceased to collect the survivor benefits, but you must have10 years of marriage there to get the to be eligible for the survivor's benefits there.
Okay. And number six is this one I put in here, a number of railroaders, finishing the race. And what do I mean by that is you know, railroad retirement is very powerful And it's a great way to retirement. I've seen railroaders leave at, you know, 25 years, or I've seen some even leave at 29 years where they're still a year away and you're just leaving so much money on it. And basically it, if you're below six, eight, seven years of full retirement age benefits versus that discounted rate, That doesn't start till 62. So, you know, it's like, oh, here's 62 with a 30% discount or full retirement benefits. So you know, everybody's situation is different, but this, I would just want to drive home. That point is just if you're there a year, two, three, And it's not, you know, finishing that race, I guess I'll just leave it at that. But it's a big, it's a big number to be leaving on the table. So I just wanted to put that in there as the last one at number six.
So I hope you found this video helpful, some food for thought there feel free to sign up for my boarding for retirement process. If you're close to retirement, these are the claiming strategies that you guys start be thinking about, right? Big part of retirement. So it's good to have somebody to help guide you along on those decisions that you make.
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