How Your Last Non-Railroad Job Will Affect Your Railroad Retirement

Transcript:

Learn the effects of continuing to your work for your non railroad employer when your annuity starts.

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 that time when you're about to start your annuity. You're no longer working for the railroad, or maybe you're working for the railroad and have another job, another position. I hear some railroaders do that. They might have two jobs.

So what I want to talk about is the term that the Railroad Retirement Board uses called the last pre-retirement employer. Very, very important. But first, there's two things that identify if you have a position, a non railroad position, and then you go and start your annuity.

So the first thing you got to worry about is always your current connection. I talk about it all the time. If you're not working for the railroad and you have another W2 position, and you go start your annuity, you probably don't have your current connection and which case your survivor annuity is lost. W2 position is the operative word. You could be self-employed in an LLC, you're fine on the current connection.

But understand that, and that's survivor annuity. Huge, huge stuff, right? Talking about the family and stuff like that. So very, very important, that survivor annuity. So understand that, on working outside the railroad and then starting your annuity. All right? So keep an eye on that.

Now, the other part I want to talk about is the deduction portion on it that's going to affect your annuity. So what I'm talking about is the last pre-retirement employer. They use the term LPE. So I kind of bring up these acronyms because you'll probably see it. So it's the employer within the six months of the annuity begin date, ABD.

So if you left the railroad and you're maybe working at Home Depot for the year between your annuity starts, who's your employer the six months before your annuity starts? That's a non railroad, so your current connection's gone and now you have a last pre-retirement employer. Now, assuming you're going to continue to work for that employer, this is where the reductions are going to come in.

And what's interesting is, this can affect you, the employee who's going to work, and it can also affect the spouse annuity. If the spouse starts his or her railroad retirement on a spousal annuity and they continue to work, they're going to have the tier two reductions. And remember, the tier two reductions are $1 for every $2 earned up to 50% of the tier two annuity value. So very, very important.

You might be having a job where, oh, I'm working for the railroad and I'm working part-time right before the annuity starts. And then your annuity starts, say, oh, I left the railroad, I still have my part-time job. No, that's... You're going to run into this last pre-retirement employer issue and they're going to deduct from your tier two. All right? So understand what goes on there. Now you might say, oh, you know what I'll do is I'll quit my job.

But if it's six months, then you're going to be... And then go back after it after you start your annuity, they're going to go back to your last pre-retirement employer and still deduct you. So six months is that big window, and that employer, very, very important.

Now remember, this can occur at any age. So like full retirement age, 67 or whatever, it doesn't matter, if you go back to that. If you go back to the last pre-retirement employer, LPL, at any time, they're going to come for the tier two deduction. So I want to make you aware of that, right? It's a pretty stiff penalty, $1 for every $2 earned up to 50% of tier two, especially if you have a big tier two number. You have to think about that. That's part of the planning you have to do when you think about going back to get that other position.

So feel free to reach out to me if you have any questions about that, especially if you're at or near retirement. These are the types of issues that you really got to lock these things down to understand what your retirement income looks like. So go through my Boarding Ferrero Retirement Process, like I said, if you're at or near retirement. We'll go through a lot of this, see where the penalties are, see what's going to be hitting us, that type of thing.

Please subscribe to my YouTube channel. Click on the notification bell to get the latest videos. And until next time, everyone, please stay safe, stay on track, and take care. So long, everybody. Bye.

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