How to Build a Bridge to Early Railroad RetirementTier 2 Video Retirement Financial Planning
Thinking of retiring early from the railroad? You really should watch this video.
Welcome everyone to the Highball Advisors railroad retirement whiteboard. My name is John McNamara of Highball Advisors and today we're going to talk about retirement. I talk to a lot of prospective clients and clients who say, "Hey listen, I'm interested in leaving the railroad early. What can I do? I'll have my 30 years at 52 or 53. What's my options? What can I do?"
So I'm going to walk you through this and give you some suggestions on maybe how you can work through this. So we'll start here on the right. The goal, retire early, like I said, you have your 30 years or maybe you even have your 25 years and you're just tired of working in the railroad and you want to get out early. So these are things that you're going to have to start planning for a lot earlier, believe it or not. It's not something like I'll wake up on Monday and retire on Tuesday. These things have to be put in place.
You want to give yourself the option to retire early. So here's the problem, right? You don't have access to your retirement funds, your 401k's until 59 and a half. Your railroad retirement annuity's not going to start paying off until you're 60, assuming you have 30 years. And if you don't have your 30 years, you're going to take a reduced railroad retirement benefit at 62.
So those are problems, and the other thing is you need to fund your expenses. So if you want to leave the railroad at 52, 53, well you got the house, you have mortgages, food, shelter, healthcare, right. Medicare doesn't kick in until 65. So those are expenses. So that's the problem when you say, "Oh, I want to leave early." So you've got to think about that. Maybe somebody might even have pensions that kick in at 55, but not everybody has that.
So what can you do to help remedy this situation? Is you want to start thinking about a bridge account, which is basically a taxable investment account. You can put the money in there, take it out at any time versus the 59 and a half. You can put after tax money into there, let it grow, let it grow, compounding. No contribution limits. So you can keep putting money in there, a nice longterm capital gain. So when you take it out, it's at 15% versus actually on your 401k's, that's taxed at ordinary income. So longterm capital gains, for most people's 15%. it can be lower depending upon your income, but figure on 15% when you do your planning for it.
And then obviously you can get a greater investment selections, more so than a 401k where you have 20 or 30 different funds. So if you're thinking about this strategy of leaving early the railroad and you got some time left before you actually move, you really want to start thinking about this bridge account. Find the nickels and quarters in your cushions in order to start funding this account because this will give you the options to leave early.
So I hope you've found this helpful. Send me any comments that you have, and I'll respond to them. I appreciate that. Please subscribe to my YouTube channel. It keeps growing. So that's great to see. In the meantime, 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.