"Breaking Bad" in Railroad Retirement

Transcript:

Thinking about when to retire, learn the break even points for 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 breaking even in railroad retirement, right? What are those break even points? Where, when is it best to retire? So what I'm going to do in this here is a, I'm going to compare it against social security. Everything's going to become more of a mathematical analytical approach, right? Everybody has their own personal reasons on when they want to retire all those things. This doesn't factor into it, right? This is just going to give you the knowledge and of concepts of, Hey, maybe this is when I should retire when I shouldn't retire. All right. So if you look at the right financial service industry, right, 99% of it is geared towards social security and rightfully so because 99.5% of the population takes social security and not railroad retirement; it might be higher. I don't know. So let's just look at how breakeven points are hard, right? So I use an example here. So let's look at somebody's social security or tier one, right? $25,200. If they retire at 62, which is early retirement, reduce their full retirement age. In this example would be $36,000, right? 30% reduction now with social security, right from full retirement age to 70, you get 8% credit every year. So if they've decided to collect social security at 70, they'll get 44,006 40. So let's look at how that looks, right? Social security. So here they are, right. They retire at 62, early retirement, 62. And at the end, by at 90, we'll say they're up over $600,000, right? However, if they go out at 67, you know, they'll max out at over 800,000 they have taken out a social security by the time they're 90.

However, as you can see, they've break even that's the break even number is around 77 and a half between early retirement and full retirement for social security. Now, remember the person who gets those delayed retirement benefits at 70, right. That extra 8%. Okay. Look how much they finish up with, Oh, close to a million dollars. That's a, you know, geez, over $250,000 more that they will have taken out. Now the trick is you've got to make it to 90. Right. So and then their break even point. So they'll break even with the 62 people around 78 and then the before retirement people around 80. Okay. So that's just the way to look at those things is say, okay, I get a lot more money, but this is where I break even. Right. That's where they say break even points. And this is what everybody talks about.

Social security. Now, this is what I find very interesting is let's add railroad retirement into it, right. This is going to look different. Right? So it's social security and tier one is the same. So we'll just use that, those same numbers. However we want to add in the tier two. Right? So let's say a full retirement, a railroader age, 67 they're tier twos, 14,000, right. Taking at 62 to 30% reduction. $9,800. Okay. And at 70, oops, I didn't need another zero. There is $14,000. Tier two has no delayed retirement benefits. So there's no value in there. Okay. It would, it might grow. It would grow, I should say because of those extra years of employment, but even still, right. Let's just go off of this scenario here. Right. So,u62, all right. They're taking a lot more money and they're heading up here because you're well over a million dollars because you're getting tier one and tier two.

All right. And then obviously we're going up well over 1.2 million. Now what I want to show you here is the breakeven points. All right. So for early retirement to a full retirement, it's the same number, right? It's basically the same. It's the same number. It's going to be 78 or 77 and a half. However, look at the person who waits till 70. Okay. They don't catch them out here till 80 and they don't catch the, a full retirement people here out to 85 years old. Right. So it's shifted way out because you're not getting those delayed retirement benefits credits, I should say for waiting in railroad retirement. So now obviously there's no inflation adjusted in here cause that's a variable. It could go up and down all the time. It's not static for 30 years. So that's why I didn't put that in there.

But that's something to think about that, you know, that's because now you say, Whoa, wait, Whoa, I gotta make it out to the 86 now to max out. So like I said, this is just, this is just, you know, analytical mathematical approach to it. This is not a personal say, Oh, I've got to leave early. Or I like to stay late. I don't, I didn't factor that into any of those things, but this will just hopefully give you some ammunition to making that decision on when is the best time to retire. So feel free to reach out to me if you have any questions about this, if you're thinking about planning for that retirement understanding, what is the right time to go? Like I said, just, you know, book a meeting with me if you're close to retirement and that'd be great as always click on the notifications, get the latest video, right. And so you won't miss any and subscribe to my YouTube channel, appreciate that and share it also with other railroaders, getting some great comments and feedback on that. So everyone told next time, please stay safe, stay on track and take care so long everybody. Bye.

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