How Working Affects Your Railroad Retirement

Transcript:

If you're working and you're going to collect a survivor's annuity, learn about the possible deductions that could be coming your way.

Welcome everyone to another edition of the Highball Advisors Railroad Retirement Whiteboard, my name's John McNamara of Highball Advisors and today we're going to talk about the survivor annuity and specifically the deductions that come to the survivor, the recipient of the annuity, if he or she is working specifically, really before full retirement age. So let's just get started into it, right? So real high level in the survivor annuity, this is something that you can get if your spouse passed and worked for the Railroad. However, can't really get till you're 62, unless there's exceptions, in case you're raising minor children, or if you're disabled, then you can get it before 62. All right. But let's just work on the premise that you're 62 so that's when the survivor annuity would kick in. So more than likely you'll still be working.

So let's learn about some of the deductions here in the survivor annuity. So first of all, it's not payable if you yourself worked for the Railroad, they won't pay out the survivor annuity. Not really sure why that is, that doesn't really kinda make sense to me, but it is what it is, that's the way it is. So now when we talk about, right, they're going to look at to figure out your deductions, where are they going to look at to base your deductions off of on your survivor annuity? So for W2 employees, they're going to look at your wages,, and then take out the taxes and the 401(k)s , and other insurance, any of those things that draw down, right? They're going to look at that. And then for self-employed, they're going to look at your net earnings and then they're going to minus half of the self-employment tax. Right? So that's how they're going to look at it. Now, they're not going to look at investment income. So from stocks, and mutual funds, maybe dividends, other pensions, gifts, inheritances, right? Those things they don't classify as income so there's no deductions off of that.

All right. So let's talk about what kind of deductions are we looking at? So we're filming this in 2021. So they move every year. So this year in 2021, this is how we go, right? So if you're over full retirement age, there's no deductions, right? The survivor annuity is what the survivor annuity is, right? So anybody born after 1960, your full retirement age is 67 years old. So if you're 67 and older after 1960, then you'll have no reductions. So if it's the year of the full retirement age, you're going to be turning into that full retirement age, you can make up to $50,520. before there's any deductions. And then what do those deductions look like?

So for every $3 that you earn above that $50,000 number, they will deduct $1 out of that survivor annuity. So that's that age, the year of turning into full retirement age. Now, if you're below, starting at 62 for this example, below full retirement age, that number drops significantly. It's $18,960 and it gets even worse because for every $2 you earn, they're going to take $1 out of the survivor annuity. So you really got to plan for that because that's a significant hit on income that you're making there. They do have a special one-year rule, just real high level. So let's say you're going to retire and then you say, "I'll take the survivor annuity." You can make up to in those months up to $1,580 before these deductions apply. So instead of taking a look at annually, to look at a monthly basis, so under the full retirement age, 1580, and then that one year of the full retirement age is 4210. Then obviously if you're in full retirement age, you can just keep working, it doesn't matter. So it only affects the months that you work.

Is that special one year rule. It really doesn't affect too many people, but especially if you retire and you don't have any more earnings, so you'll be fine on that. So, I hope you found this helpful. Reach out to me if you have any questions about it. It gets a little bit tricky. Like I said, very important planning here because those deductions could really affect your budgeting and retirement plans. All right. Please subscribe to the YouTube channel, share the videos, it's been going great, I want to get to 2000 subscribers, get closing in, so share it there, I'd really do appreciate. And 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.