Greetings, everyone, and welcome to the latest installment of the Highball Advisors Railroad Retirement whiteboard. I'm John McNamara from Highball Advisors, and today our focus is on the intricacies of working while collecting your railroad retirement annuity. Let's delve into the details of work deductions, particularly concerning social security rules.
Even if you have reached the milestone of 60 and 30 years of service, the social security work reduction rules persist until you reach your social security full retirement age. For those born in 1960 or later, the full retirement age is 67. Now, let's break down the tier one work deductions.
If you start your annuity and continue working in a non-railroad position, you can earn $1 for every $2 over $22,320 before reaching your full retirement age. Once you hit the year of your full retirement age, this ratio changes to $1 for every $3 earned over $59,520. It's crucial to evaluate whether the work deductions are worth it based on your actual earnings.
For work deductions, W-2 wages and self-employment income are considered, with self-employment income being the net earnings after deducting expenses. Other sources of income, such as interest, dividends, rental income (assuming it's not your main business), and income from stocks and bonds, are exempt from these deductions.
Now, let's shift our focus to the tier two section. Tier two work deductions come into play if you're working for your last previous employer (LPL). In this scenario, you'll lose $1 for every $2 earned, up to 50% of the tier two amount. Importantly, these deductions are not subject to social security rules and can apply even before reaching full retirement age.
While tier one work deductions cease at full retirement age, tier two deductions persist. Understanding these nuances is crucial for making informed decisions about your retirement income. If you have questions or are considering working deductions in your retirement strategy, don't hesitate to reach out. Schedule a Railroad Retirement meeting for personalized guidance. Subscribe to my YouTube channel for more valuable content, and hit the notification bell to stay updated on our latest videos. Until next time, stay safe, stay on track, and take care. Goodbye, everyone.
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.