How Social Security Going Bankrupt Affects Railroad Retirment

Transcript:

Will Social Security derail 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, a lot of the stuff in the news about social security and solvency going bankrupt, reducing benefits. All right? I get from railroaders, "Hey, how's that going to affect the railroad retirement?" So I thought I'd shoot a video on that, because you know what? I'm looking at. It might affect it. It really will.

So let's just kind of take a step back, 10,000 foot type approach, and look at what's going on. So social security is bankrupt and solvent, reducing benefits like ... 2033, 34, 35. That's without any changes. So if they just keep the way things are right now, maybe moving retirement ages, reduced methods, but anyway, they're not going to be able to start making the full payments around 2035 at the latest.

Now, when you look at railroad retirement, as reported from the trustees, completely solid. No cash flow problems for the next 75 years. So fantastic, right? Railroad retirement's great. However, we have a linkage and that's the problem. There is a linkage between social security and railroad retirement. So let's walk through it here.

Tier one is the highest 35 earning years of your social security years and railroad working years. All right? So now that's the linkage. Tier two is safe. We'll leave that by itself. It has no relationship to social security at all. So that portion of your railroad retirement is fine. Now, if you look at social security, if you're just a social security worker, it's your highest 35 non-railroad years, right? Social security will never take into effect you're working for the railroad when they give you a social security number, so that will come into play.

So now what's the issue here, John? Right? So the problem is, let's say you have 20 years of the railroad and 15 years of social security. You're going to collect your retirement through the Railroad Retirement Board, right? Because once you have your five years, you're going to get vested, and all your benefits, social security, railroad retirement, that tier one number all comes through the Railroad Retirement Board.

So how they do that? Railroad Retirement Board says, "Oh, I've got my money. I'm ready to pay you my portion of the tier one." What they'll do is, they go out to social security and say, "Okay, we need the ..." In the example that I gave, the 15 years of the social security years, to come over to make up for the tier one. Now, what would happen is, they might go over to Social Security in 2035 and go, "Hey. Don't have those 15 years. I can give you 75% of those 15 years." So, that might be a reduced tier one number. That's the type of thing we got to keep an eye on, is maybe the reduction coming out in 2035 on that portion of the tier one.

You might say, "Well, I'm getting it from the Railroad Retirement Board." Well, the Railroad Retirement Board's getting it from Social Security. All right? Even though you're collecting railroad retirement, it's still going to be affected on social security. And then you look at it, Railroad Retirement Board uses a lot of the rules from social security, so if social security changes, let's say, the retirement age for full retirement age, that might be on the table for some people earlier in their careers.

That probably will come into the railroad tier one portion. Just to sum it up, it is going to affect your railroad retirement, so it's definitely something we want to keep an eye on, and we'll, we'll be watching it for years to come, but I thought I'd just draw that out for you now. So the career railroaders who have 30, 35 years, 40 years, you don't have to worry about this issue, because, like I said, railroad retirement is in great shape.

It's only when social security comes into play that part of that tier one we want to keep an eye on. Listen, if you're nearing retirement or at retirement, reach out to me. Go through the boarding for railroad retirement process. We'll talk about some of these options, some of the pitfalls, in the boarding for Railroad Retirement Assessment. That's great stuff.

Click on this video, subscribe to it, share it, because I get this from a lot of railroaders, so if you can share it, they can all understand exactly what's going on. Until next time, everyone, please stay safe, stay on track, and take care. So long everybody. Bye.

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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.