How to Lose Your Tier 2 in Railroad Retirement
Tier 2 VideoTranscript:
Learn how an ex-railroader could lose their tier two in railroad retirement. Welcome everyone to another addition of the Highball Advisors Railroad Retirement Whiteboard. My name's John McNamara of Highball Advisors. And today we want to talk about tier two and in retirement and the possibility of losing the tier two benefit. Specifically what I'm talking about is the survivor annuity portion of that tier two. Okay? And the importance of retiring properly from the railroad.
So just to recap. Right? Tier two is that pension income, that additional 4.9% you've been paying your paycheck creates a nice retirement pension for you and your spouse. I'll give you an example here. If you retire, let's say you have 25 years of service and you're tier two's accounting for $2,500 a month. That's like a $600,000 asset. So that's a serious, serious amount of money. And it's a great source of guaranteed retirement income. So it's very, very valuable. And we want to make sure that that gets protected for you.
So what I'm talking about is that current connection, is the importance of retiring with that current connection. All right? I did a video on it, Staying Connected in Railroad Retirement. Very, very important that you retire with that current connection. So if you leave the railroad, let's say you have the 25 years as I send the previous example. And then you go and you go work for somebody else. Okay? And then you go turn on the railroad retirement. Well, you're not connected, you've lost your connection. So if something unfortunate happens to you, that spousal and that survivor annuity is going to be gone. So what would happen, is your spouse would then just get the tier one portion. The tier two would be gone. So very, very important to keep that current connection going into retirement. All right?
So let me just give you an example of a railroad of retirement. Right? So in this example, make a nice neat railroad with tier two, let's say they have, I'm just talking about tier two, not to tier one. I have a $1000. The spouse gets 45%. So they have a tier two benefit of $1450 a month. Right? Now with the connection, if they retire with the connection, the survivor. Right? The spouse will get the $1000. Right? Because they get that portion, the spousal goes away, but they would get the $1000.
However, if you're going to retire without a connection, survivor annuity without a connection is zero. Right? That's $12,000, that's a big lump there. Right? However, like I said, they still get to tier one. So really understand that current connection scenario, very, very important. Last, going go the work and then retiring and then maybe even working, once you start collecting railroad retirement. All those things come into play. So you really have to understand because it's a big part of estate planning. Right? That's a large part of your guaranteed retirement income stream that you could be jeopardizing there for your family. So understand those situations.
So I hope you found this helpful, give you some food for thought. Check out my video. Like I said, Staying Connected in Railroad Retirement. That'll give you some more insight on the topic. Feel free to reach out to me. I have a boarding for rare retirement process. I discuss all this because of is part of a estate planning. That's what financial planners do. Right? Big part of it. Sign up for that, really good stuff there. Subscribe to YouTube channel, share this with other railroaders, click on the notification and get my latest videos. I do appreciate it. We're over 2000 subscribers, so we're really rocking and rolling here. So that's great stuff. So 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.
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