Greetings, everyone, and welcome to another installment of the Highball Advisors Railroad Retirement whiteboard. I'm John McNamara from Highball Advisors, and today we're delving into the topic of Last Previous Employer (LPL) deductions and how they impact railroad workers and their spouses.
LPL refers to the last non-railroad employer you worked for before your annuity begins. If you've worked for a non-railroad employer within six months before your annuity start date, there will be a reduction in your tier two benefits. This reduction is $1 for every $2 earned, up to 50%, for both the railroad worker and their spouse's annuity. Even if the spouse hasn't worked for the LPL, they are still subject to the deduction.
If the railroad worker continues to work for the LPL or if the spouse is employed there, the spouse's annuity can also be significantly reduced. For example, if a railroad worker has a tier two benefit of $1000 and their spouse has a tier two benefit of $450, and the railroad worker continues to work earning $100,000 annually, the railroad worker's tier two benefit would decrease to $500, and the spouse's benefit would decrease to $225, a 50% reduction.
Conversely, if the railroad worker retires but the spouse continues to work at the same job earning $100,000 annually, the railroad worker's benefit would remain unaffected at $1000, while the spouse's benefit would still be subject to the tier two deduction, dropping to $225.
It's crucial to understand these deductions and their impact on retirement income. If you're approaching retirement and want to ensure you have a clear understanding of how these deductions will affect your benefits, feel free to reach out to me. It's essential to have a comprehensive understanding of your retirement benefits to avoid unexpected surprises that could affect your retirement plans.
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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.