Hello, and welcome to another edition of the Highball Advisors Railroad Retirement whiteboard. I'm John McNamara of Highball Advisors, and today we'll be delving into the intricate relationship between Social Security and your railroad retirement. This discussion aims to provide clarity on how the Social Security Administration and the Railroad Retirement Board intersect, influencing your annuity.
Let's start by revisiting the fundamentals of railroad retirement, specifically tier one and tier two. Tier one encompasses your top 35 earning years, combining both social security and railroad work. In contrast, tier two consists solely of railroad service. Social Security determines its benefits independently, considering only the individual's work within the social security system. Railroad years go unnoticed on the Social Security Administration's statements.
The process involves the Social Security Administration calculating the social security benefit and forwarding that amount to the Railroad Retirement Board. The Railroad Retirement Board then combines this social security amount with its own calculation to determine your tier one benefit. It's crucial to note that there is no duplication of benefits; you cannot receive both Social Security and railroad retirement checks simultaneously.
To illustrate, let's consider an example. Imagine a railroader with 20 years of service. Suppose their Social Security benefit is $1,300, and the Railroad Retirement Board calculates their tier one benefit as $3,000 per month. The $1,300 from Social Security is transferred directly to the Railroad Retirement Board, which complements it with an additional $1,700. As a result, the individual receives a single check for $3,000 encompassing both social security and tier one benefits.
This interplay between Social Security and railroad retirement becomes especially relevant in light of potential changes or reductions in Social Security benefits forecasted around 2035. It underscores the importance of understanding how these dynamics impact your tier one calculation.
Furthermore, it's crucial to notify the Railroad Retirement Board if you're receiving benefits from both Social Security and railroad retirement. Failure to do so may result in penalties and interest.
For those navigating the complexities of railroad retirement calculations, I encourage you to reach out and explore the comprehensive Railroad Retirement meeting. It's a valuable resource, especially for those approaching retirement. Please subscribe to the channel for more insightful content, and don't forget to click on 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.