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7 Railroad Retirement Quirks That Can Surprise Married Couple Thumbnail

7 Railroad Retirement Quirks That Can Surprise Married Couple

Tier 1 Tier 2 Video Spouse Annuity Survivor Benefits Financial Planning


Learn some of the nuances that affect your railroad retirement as a married couple.

Welcome everyone to another edition of the Highball Advisors Railroad Retirement whiteboard. My name's John McNamara of Highball Advisors, and today we're just going to talk about some of the intricacies and complexities, I guess, of claiming railroad retirement when it really comes to married couples. There's just a lot of weird little things in there that I thought I'd just bring to the surface here. I'm sure there's probably a few others, but these are seven that I came up with, so I'll just walk through them and then you can think about them as you start to get ready to claim your railroad retirement.

So the first one is retroactive payments could boost survivor and spouse payments. So this is on the tier one portion of the spousal annuity or a survivor annuity. So let's say if the spouse is still working at full retirement age and they've gone a month, two months, maybe a year past their full retirement age is when you claim your spousal portion of the railroad retirement, go back six months and get the retroactive payment because there's no delayed retirement credit. So even if you're one month over your full retirement age, just go back six months and say, "Hey, I want to start my annuity six months previous," and they'll give you that lump sum for six months because there's no delayed retirement credit. Same thing for the survivor annuity also. All right, so something to think about there.

Number two, spouse benefits are often higher than anticipated, which is true. Especially on those spouses that maybe they've stayed home, they don't have a lot of income, they raise kids, those type of things didn't work, they're not expecting anything. But at the end of the day, it's very good. It's 50% of tier one and 45% of tier two. So a lot of people don't realize how big those spousal annuities are. And even on the survivors side, they're very good also. The full tier one and tier two of the deceased railroader, they're very, very good.

Number three, survivor benefits can be claimed earlier than 62. That's true. So if you have no dependents in the household, you can start your survivor benefits at 60, and if you have children under, I believe under 19 or 18, you could start earlier than that. And if you have a disabled child, you can start earlier than that. Those survivor benefits, very, very important bridge. So that's something to think about, you don't have to wait till 62 on that.

Number four, a new marriage can affect your survivor benefits. So if you're divorced and you're looking to get remarried, so currently your survivor annuity is based on your deceased spouse, but if you get remarried that's going to go away. So that's going to affect that survivor annuity. So something to think about that. Just do the math on it, on what that cost is on that marriage.

So number five, the earning test complications come into play. Well, that's definitely true, especially when you start claiming, you claim your, let's say spousal annuity, because they've retired. So what you're going to have is if you continue working, you're going to have reductions. You're going to have work reductions on your tier one, you're going to have tier two work deductions also. So that's that earnings test portion of that. Just because you're collecting the annuity, especially on the spousal side, the spousal annuity, there's going to be work deductions based on your earnings. So that's very important. Really got to understand those earnings tests.

Going back to survivor benefits, number six, survivor benefits have claiming complexities. That's for sure. So there's a lot of different strategies there if you're going to claim off a survivor because you could do something where, "Hey, maybe I'll claim my survivor benefit early." We said early as 62 and maybe you went back to work and you've built up your own Social Security or railroad retirement benefit, or probably in this case if you're not working for the railroad it'd be Social Security, and then what you can do is claim your survivor benefit to start that early, let your own Social Security grow and then claim that at 70, switch out of the tier one portion of the survivor annuity, you still get the tier two portion. So there's a lot of playing off there. "Hey, let's start one, we'll let the other one grow." So that's something to think about on the survivor benefits. So that's another quirk there.

And then the last one I came up with is divorcees can claim benefits based on the ex-spouse earnings. So that's that divorce spousal annuity. If you're married 10 years, you can still get your annuity. That's just the tier one portion on the spousal annuity. It's going to be based on your ex's tier one portion. It's going to be equal to 50% of what the railroad is receiving. So that's something to think about also.

So these are just seven little quirks and, like I said, there's probably many more, but once again, it's the complexity behind it, claiming the right strategy. Very, very important. So I hope this is helpful. Maybe it triggered a few things. Reach out to me if you're at or near railroad retirement, want to go through some of these claiming strategies. Very important stuff. Work with this stuff with all my clients. Share this video please, especially those [inaudible 00:06:01] or at or near retirement because you really only get one shot at claiming, you want to do it right. Click on the notification bell to get my latest video. Until next time, everyone, please stay safe, stay on track, and take care. So long everybody. Bye.

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