Learn the benefits that railroaders leave to their spouses. Welcome everyone to another edition of the Highball Advisor's Railroad Retirement Whiteboard, my name's John McNamara of Highball Advisors. And today we're going to do a little bit of estate planning, right? So not a great subject as always. I don't like talking about these things. But so we want to understand what happens when the railroader pass away. What happens to their spouse, right? What benefits are afforded them? So, I thought I'd just go through this. It will be nice, high level stuff, but it'll really give you an idea of what your spouse can expect if something unfortunate happens to you.
All right, so let's just get started. We'll start with what the railroad originally gets, right? So they get tier one, which is made up of the top 35 earning years of railroad service and social security, whatever those top 35 years are. Then you have tier two, which is made up of your top five earning years, then multiplied by the number of service months that you had, all that stuff. So that's your tier one, tier two. Then, your spouse gets half of your tier one amount, and then gets 45% of your tier two amount. So, that is your basic railroad retirement annuity, okay?
However, so now we're talking ... something has unfortunately happened to the railroader that has passed. So this annuity is going to go away, and we're going to move to a survivor annuity. So what does the survivor annuity look like? So your spouse will be receiving the tier one and tier two portions of your annuity over here. So this amount here, this is what your spouse will get. Now, the spousal annuity down here, that goes away. So no spousal annuity, so it's just this part up here, no spousal annuity. So, that's the nut of it, so to speak. So, that's what you can plan on. Important thing to note here is there's no tier two cost of living adjustment. So all these things, tier one adjusts with the cost of inflation, and the tier two part moves at about 32.5% of inflation. However, there will be no tier two costs of living adjustment until the spouse annuity exceeds the widower's annuity, little tactical stuff. So this number becomes stagnant until this number catches up, and then you start getting that cost of living adjustment. It's a little complex. It's, I don't want to say nickels and dimes, because money is important, especially when it comes to survivors, but it's not that big of a significance, and if you want reach out to me, we can discuss that.
So hopefully I've given everybody here a good background on the survivor annuity. Reach out to me if you have any questions. Please share this video with other railroaders. This is an important topic. Share it. Subscribe to my YouTube channel, and click on the notification, so, when you get videos like this, that I do, they're really important. You can just put them away and say, "Hey, I understand that now." Reach out to me if this is a topic that you're a little confused on. Reach out to me. Schedule a free boarding for railroad retirement assessment, and we'll work through these numbers with you. So everyone, until next time, please stay safe, stay on track, and take care. So long everybody, bye.
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