How to Claim Railroad Retirement When You Both Work For the RailroadTier 1 Tier 2 Video Spouse Annuity Retirement Financial Planning
What happens to a couple's railroad retirement when they both work for the railroad?
Welcome, everyone, to another edition of the Highball Advisors Railroad Retirement Whiteboard. My name's John McNamara at Highball Advisors, and we're going to talk about a unique position or situation where a husband and wife, partners, are working in the railroad industry. They're both eligible for railroad retirement when railroad retirement comes around. I thought I'd go around how you're claiming and exactly what the situation is, and really the disadvantage almost, in a weird way, but it's there for sure.
Let's just go over a regular spouse annuity. A spouse annuity of a railroader would get 50% of the railroader's Tier 1 and 45% of Tier 2. All right? That's just a traditional spouse annuity. But now we have a railroader and they're both paying into Tier 2, so how would that work? The important thing to remember is basically the highest railroader is going to get their Tier 2. And then the other, the spouse of the railroader, who probably has a lower Tier 2 amount, is only going to get either their Tier 2 amount or the higher of the spousal annuity.
The point is the spousal annuity basically for the most part just goes away. Let me walk through it to you and see if this example works. I'll just use an example. Let's say Jim. He's got 30 years, he's at 60, married to Jane, who had 15 years in the railroad and she's also 60. They're going to start their railroad retirement, and he's due $3,000 in Tier 1 and $2,000 in Tier 2. 30 years, say $5,000 a month coming in. Now Jane, if she was a standalone, wouldn't be able to claim railroad retirement at 60 because she only has 15 years. You need 30 years of service. So, she's going to go for the spousal annuity, so she would get... On her own at full retirement age, she would be due of $2,000 and $1,200 in Tier 2. I just put that in there. 15 years of service.
Here, going down, so now at 60, what's her spousal benefit? She's going to get $1,500, which is half of the $3,000, and then $900, which is 45% of the Tier 2. That's what she's eligible for now. Now, what she can do, is let's say at 70, she can say, "Well, I'm going to claim my own Tier 1 because this was my Tier 1 at full retirement age. So, I have the delayed retirement credits at 70 and get $2,519." And then, what she's going to do, instead of taking the $900 is she's going to take her own Tier 2 of $1,200, and that would be her new amount.
Now, it's important to remember that there's no delayed retirement credits on the $1,200, but as you can see in this example here, Jim is married to a railroader, Jane, he gets no spousal annuity. That's gone. He's collecting his own Tier 2. Jane is married to Jim, a railroader, who's also a railroader, and she's going to collect actually her own Tier 2 eventually. She'll start on this Tier 2 but then eventually go to her own Tier 2. So, she wouldn't be going, "Oh, I got my $1,200 plus $900..." is $2,100, because that's the spousal annuity. The spousal will go away and she'll claim her own Tier 2.
As you can see there, in these situations, really, you just want to think about the Tier 2 portion. You're going to collect the higher of the two amounts, so either the spousal annuity or your own Tier 2 amount. They're not going to combine into one larger amount.
I hope you found this video helpful, railroaders that are married or... Well, you got to be married to collect. So, married individuals. I hope you found this helpful. Feel free to reach out to me if you're at or near retirement and need help with it. Click on the latest on the notification bell to get the latest video. Please subscribe to the YouTube channel. I do appreciate that very much. Until next time, everyone, please stay safe, stay on track, and take care. So long everybody. Bye.
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