How Much Should I Spend in Railroad Retirement?Tier 1 Tier 2 Video Retirement Budgeting Financial Planning
Learn how to come up with a realistic spending plan for your 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 putting that spending plan together for retirement, right? So what does retirement look like as far as spending, and then making sure you match up with the income to match the spending. So let's start over here on my right. Your left is, think about the budget retirement budget. What does that retirement look like with you? So I always start with the essentials and that's the important thing, right? Food, clothing, shelter that goes into essentials. Netflix might be essential. I don't know. Then you have healthcare, right? That's going to be a big ticket item, the variable item depending. Right? So that's big and taxes always going to be there. They're always going to be there probably more than healthcare.
So those are the things you just kind of have to make that budget up for understand that, right. Don't have to be exact on it, but you have to come up with a framework there to get that. And then over here is on your retirement income side is, was where's the money coming in from, right? So you have tier one, tier two, possibly a pension. That's what I call guaranteed. Okay. That's not going anywhere. Then we withdraw from our retirement accounts, our 401ks IRAs. Right? So that's a variable number depending upon the you know, how you take the money out, right? So that's going to be variable. So we have guaranteed and variable. So let's work through an example, see what this looks like in real life. So let's say a couple railroader and spouse have a budget of $7,000 a month for retirement.
All right. And their tier one is going to be $3,500 a month. Tier two is going to be $1,500 a month. And let's say they have a pension of a thousand dollars a month. Okay. That those first three are guaranteed, right? Those are all guaranteed. And then when they tap into the 401k, in which case I set this one, a $500,000 401k, then using the Guyton withdrawal guardrails, taking out 5.4% of that per annum, you can do $2250 a month. Okay. Under that system and go into another video, perhaps. So that gives you actually a total of $8250 a month, which is more than the $7,000. So, which is great. So $6,000 of that, which is 85% of the budget's guaranteed. All right. And then $2250 with the other 15% is variable, but you can tell, we have a little leftover, which is great.
So the way railroaders want to think about it is if we, if we can get 80% or more guaranteed of your budget, you're in great shape. Okay. That's assuming you have some retirement savings. If you have no retirement savings, then this number has to be a hundred percent. That's just basic math. I mean, otherwise it's debt and everything that comes with that. So a work around this number, figure, you know, 80% of the above, if you can get there, that's great covered, you know, that covers suspending. So you know, these are one of the things that I do with my, you know, my boarding for railroad retirement process. I match up these numbers and put it in a nice graphical form and will really demonstrate to you what this looks like. Okay, how much can you spend? What's the withdrawal rates look like?
What's the guaranteed retirement income look like very, very valuable stuff. Really helps railroaders near, you know, those railroaders who are near or at retirement. This is very helpful. If you're 35 years old, you really don't want to be looking at this. It's not that you know, don't do retirement budgets at 35 years old, please. All right. This is for the railroaders who are closing in on retirement. So sign up for that boarding for rare retirement process. I have it. It's great. It's good way to understand if we, you know, we can work together. That'd be great. As always, please subscribe to my YouTube channel, click on the notification bell, look at the latest videos, YouTube channels going great. And a lot of really nice comments. I really do appreciate those comments. All right, everybody until next time, everyone, please stay safe. Stay on track and take care so long everybody. Bye.
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