How Your Public Service Pension Reduces Railroad Retirement

Transcript:
Learn about your income reductions if you or your spouse has ever worked for the government.

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 income reductions for railroaders or spouses of railroaders that have worked for the federal government and are going to be receiving, in particular, a pension from the government. That could be federal, state, or local. So let's see how this is affecting your annuities. It could affect the railroader's annuity, a spousal annuity. It could affect even a widow annuity or survivor annuity. Divorce spousal annuity is another affect it could have, surviving divorced spouse annuity, or even a remarried widow annuity.

It's going to have an affect. That's basically all the categories there. So what am I talking about? It's a public service pension. It means that the railroader or the spouse is going to be receiving periodic payments or even a lump sum from a government entity. That's a pension employed by the federal, state, or local governments. Why are we talking about this reduction is because there's been no withholding of social security taxes. In exchange for social security, they're getting this pension payment. They haven't made the social security payment, so now they're going to take the reduction on the Railroad Retirement Board.

What are we talking about with these reductions? It affects just the tier one. Railroad retirements, tier one, tier two. Tier one, which is the part that acts like social security, and it's going to be two-thirds of the pension amount. The gross amount, not after you've taken out Medicare and taxes and all that. It's two-thirds of the pension amount. Let's go through an example. I'll show you. Let's say if a railroader has $2,000 a month in tier one, and the spouse of the railroader gets a spousal annuity, which is 50 percent of the tier one, that's $1,000. However, the spouse also has a pension of $1,000 a month, so now we're going to have to do this reduction. So what would the reduction be? Two-thirds of $1,000 is $667. That would be the reduction. So in reality, her spousal annuity would be $333.

So now they would get the railroader is $2,000, the pension they would still get of $1,000, and $333 would be the new spousal annuity amount. All right? That's a quick overview of how the government pension offsets are going to affect your railroad retirement. You really need to plan on that, because you don't want to say, "Oh, I have my spousal annuity or even my regular annuity, and I have my government pension coming in." No. There's going to be reduction, and that's a big amount of money. It needs to be planned for, just like most things.

As always, check out my website. Sign up for a free railroad retirement assessment. We'll fill out a lot of this information and give you an understanding on those income streams. Very, very important as you start planning for retirement. Got to know what's coming in. All right? Very important. Please subscribe to my YouTube channel. The channel's going great. I appreciate it. We're getting close. Closing in on 1,000 subscribers. Very exciting. Send some comments. I'll answer those. In the meantime, everyone, please stay safe, stay on track, and take care. So long, everybody. Bye.

Get Free Railroad Retirement Assessment

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.