How Is Your Spouse Affected by Working in Railroad Retirement?

Welcome to another edition of the Highball Advisors Railroad Retirement Whiteboard. I'm John McNamara, founder of Highball Advisors, and today we're talking about what happens when a spouse continues working while collecting their spousal annuity under Railroad Retirement.

So here’s the setup: the railroad employee has retired and started collecting their annuity, and now the spouse wants to do the same—start their spousal annuity while continuing to work.

📌 Spousal Annuity Basics

Let’s quickly go over the key rules:

• A spouse can begin collecting their spousal annuity once the employee has started theirs.
• They can start as early as age 60 with no age reduction, if the employee has 30 years of railroad service.
• If the employee has less than 30 years, the spouse can start at age 62, but their benefit will be reduced due to early retirement.

Now, the spousal annuity itself has two parts:

• Tier I: 50% of the employee’s Tier I benefit.
• Tier II: 45% of the employee’s Tier II benefit.

🚨 Working While Collecting: Work Deductions Apply

Here’s where it gets tricky. If the spouse is still working and earning income, work deductions can significantly reduce their annuity.

Let’s break it down by Tier:

Tier I Deductions:

• If the working spouse earns more than $23,400 in 2025, they’ll lose $1 for every $2 earned over that amount.
• This applies until the year they reach full retirement age, where the threshold increases (to around $66,400 in 2025).
• Once they reach full retirement age, no deductions apply to Tier I.

Tier II Deductions:

• Tier II has a different rule tied to what’s called the Last Pre-Retirement Employer (LPE).
• If the spouse continues working for the same employer they had when they started the annuity, they’ll lose $1 for every $2 earned, up to 50% of their Tier II benefit.
• There’s no age exemption—this rule applies regardless of age.

📊 Example: Working Spouse Earning $70,000

Let’s walk through a real-world example:

• The spouse is earning $70,000/year.
• The employee has 30 years of service, so the spouse has no age reductions.
• Spousal annuity before deductions:
  • Tier I: $1,500/month → $18,000/year
  • Tier II: $750/month → $9,000/year
  • Total: $2,250/month → $27,000/year

Tier I Deduction:

• Income over the $23,400 limit:
   $70,000 - $23,400 = $46,600
• Deduction: $46,600 ÷ 2 = $23,300
• Since the spouse is only receiving $18,000 from Tier I, they lose it all—Tier I becomes $0.

Tier II Deduction:

• $9,000 ÷ 2 = $4,500 max deduction
• New Tier II benefit: $9,000 - $4,500 = $4,500/year or $375/month

✅ Final Monthly Benefit: From $2,250/month down to just $375/month due to work deductions.

💡 Final Thoughts

If you're a working spouse and your partner has 30 years of service, it still might make sense to start collecting what you can—especially if you're a higher earner who may not benefit much from Social Security later.

These are exactly the kinds of questions we tackle in my Boarding for Railroad Retirement Process. If you're at or near retirement, schedule a session with me—we’ll walk through your numbers and plan strategically.

👉 Don’t forget to subscribe to the YouTube channel and share this video with fellow railroaders and spouses—it really helps us get the word out. Appreciate all the feedback and support!

Until next time, stay safe, stay on track, and take care. So long, everybody!

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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.