8 Railroad Retirement Planning Facts to Know

Transcript:

Learn some important information every railroader should know 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's topic is, it's a potpourri, if I may. Just eight key facts about Railroad Retirement. So, throughout all my videos, I go in-depth on a lot of these topics that we'll cover today, but I thought I'd just do high-level stuff, give you talking points about different topics, give you some working information. And then what you do is, "Hey, if this is important," go through my catalog of videos and really drill down to get that information.

These are the eight important facts every railroader should know about Railroad Retirement. So, let's go the first one. "When can a railroader claim Railroad Retirement?" So, it's two tiers. If you have your 60 and 30, the earliest you can claim it is at 60 years old, not a minute before. So, 60 years old, as long as you have 30 years of service. However, if you say you're going to retire without those 30 years of service, then the earliest that you can do is 62 and then, you're going to have your 30% reduction, around 30% reduction depending upon when you're full retirement age. So, that's the answer to number one.

Next one up, "When can a railroader claim retroactive benefits?" A railroader can claim railroad retirement benefits retroactively once they have achieved full retirement age. If you haven't retired and let's say, it's six months past your full retirement age, you can go back those six months and get a retroactive payment. The Railroad Retirement Board will pay you for that, so, six months on that.

Next question, number three is, "What are spousal Railroad Retirement benefits, and how can these benefits affect planning?" Big part, this is one of the great advantages of Railroad Retirement, is the spousal benefits. So, a spouse can get 50% of the railroader's Tier 1 amount, which is fantastic, and 45% of the Tier 2, which is great also. Now remember, which is great if they have the 30 years, the railroader has the 30 years, that spousal benefit can turn on a full benefits at 60 years old for the spouse. That's a great deal there. However, if they don't, then you have those rules to apply, the discount rules. So even if the railroader retires at 67, let's say it's full retirement age, and the spouse says, "Well, I'm going to retire at 62," that's going to be a reduced spousal annuity because it's not the 60 and 30.

So next question up, "What are Railroad Retirement survivor benefits?" Big part of estate playing, I talk about it all the time, basically what will happen is the survival will get the same amount of the railroader's annuity. That would be that amount, right? So they would relinquish their spousal benefits and then they would get their Railroad Retirement annuity. Let's just say, if you had survivor benefits before you were actually in retirement, you can claim it as early as 60, but remember those reduction rules are going to apply there if they haven't gotten their 30 years yet. So, that's important. Estate planning is very important to survivor benefits.

Number five, "Can a surviving spouse continue to receive survivor benefits if they remarry?" That's a great question. Now remember, it's kind of twofold. If they remarry before 60, then the answer is no, they can't. Now if after 60, then yes, they can collect their Railroad Retirement benefits. So, that's important there.

Number six, "What should dual income households consider regarding Railroad Retirement?" Honestly, this is all whole question here on itself. There's multiple strategies. So, it depends. There's things like turning out social security at certain times, maybe running out the delayed retirement benefits, collecting early Railroad Retirement. It all depends upon years of service that the railroader has, will really determine that strategy, especially on the dual income households. There could be certain things where the railroader or, "Hey, maybe collect the social security of the spouse to start before the railroad retirement kicks in." So, a lot of things to play around with there on that one.

So number seven, "What should taxpayers consider if they're going to work in Railroad Retirement?" Remember, there's going to be deductions. That's the important thing on that topic. $1 for every $2 up to that amount of $19,560. Anything over that, you're going to get that discount. The $19,560. Then remember, there's no deductions at full retirement age. So, that's all on your Tier 1 portion. Remember on your Tier 2 portion, if you worked for your previous non-railroad employee and then turn on your Railroad Retirement annuity, you can lose $1 for every $2, up to 50% of the year Tier 2 benefit. So, let's say if you worked for Home Depot and then, you turn on your Railroad Retirement and then, you continue to work for Home Depot, Tier 2 reductions going to kick in. So, that's something you want to keep an eye on there.

And then finally, last one, "How are Railroad Retirement benefits affected by divorce?" That's a big question. I get that one a lot. Remember, if you're married for 10 years, you're entitled to a divorce spousal annuity, which is basically the Tier 1 amount of the railroader. That amount, not their Tier 1, but that amount is what you would be entitled to. It's important to remember that you're not entitled to any of the Tier 2 benefits. Those are things that get settled in a divorce decrees through QDRO's and things like that.

So, it's just 50% of Tier 1 and no Tier 2. So, these are just eight key facts to know, like I say, really, I could do a whole seminar, workshop on any of these topics. So search through my catalog of videos, if you want drill down deeper or reach out to me, feel free to reach out and go through the boarding for Railroad Retirement process. A lot of great information there for railroaders nearing Railroad Retirement, really see if you're on track, so to speak. Please subscribe to the YouTube channel, click on the notification bell to get the latest videos as I put them out, twice a week. And until next time, everyone please stay safe, stay on track, and take care. So long everybody, bye.

Get Free Railroad Retirement Assessment

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.