Can a Retired Railroader Earnings Reduce a Spouse's Railroad Retirement Benefit?

Welcome, readers, to another installment of the Highball Advisors Railroad Retirement Whiteboard. I'm John McNamara from Highball Advisors, and today we'll be discussing the impact of returning to work in retirement on your spouse's annuity. Specifically, we'll focus on the reductions that can occur in the spousal annuity due to your earnings.

Let's dive into it. In this video, we'll be concentrating on the tier two portion and its reduction. The regular employee annuity experiences a $1 reduction for every $2 earned, assuming you're working for your last previous employer in retirement. For instance, if you left the railroad and started working for another company after commencing your railroad retirement, the $1 reduction for every $2 earned would apply to you.

It's important to note that the employee experiences the $1 reduction for every $2 earned, and the spouse is also subject to this reduction. Additionally, if the spouse is employed and starts their railroad retirement while having their last previous employer, they too will face the $1 reduction for every $2 earned. This reduction can reach up to 50% of the tier two annuity and applies indefinitely. Unlike tier one, which may have work reductions up to full retirement age, the tier two reduction continues beyond that point.

Now, here's a crucial point that many people are unaware of. If the employee returns to work but not for their last previous employer (for example, leaving the railroad and starting their railroad retirement annuity), the spouse will still face tier two reductions in their annuity, regardless of whether it's the last previous employer or not. Any earnings will reduce the spousal annuity.

Understanding the impacts of working in retirement is vital, not only for your own annuity in railroad retirement but also for your spouse's annuity. It's crucial to consider these factors to avoid any surprises during retirement, especially when creating your retirement budget. You need to be aware of everything that affects your finances because the last thing you want is to experience a sudden drop of $300 or $400 per month, which could significantly impact your overall retirement financial plan.

I hope you found this video helpful, as it covers an essential subject. If you're nearing retirement, I encourage you to go through our boarding for railroad retirement process. This is precisely the kind of information we discuss during that process. If you found this video useful, please click the like button and share it with other railroad retirees who may benefit from understanding the importance of these factors. Until next time, stay safe, stay on track, and take care. Goodbye, everyone.

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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.