Is Railroad Retirement Enough to Want to Work for the Railroad?Tier 1 Tier 2 Video Annuity Spouse Annuity Survivor Benefits Retirement Financial Planning
Thinking about working for the railroad? Check out this video first. Welcome everyone to another edition of the Highball Advisors Railroad Retirement Whiteboard. My name's John McNamara of Highball Advisors. Today I hear a lot of things about trying to recruit people to work for the railroad. I hear everything from railroaders, how much they like it, how much they dislike it. So what I thought I'd do is just kind of do a ... I don't ever want to talk about what's it like to work for the railroad because I don't work for the railroad. I have no idea what it's like to work for the railroad. Okay?
I hear stories, but until you're actually working for it it's tough to comment. But what I do know about is Railroad Retirement. So I thought I'd just do a video on if you are thinking about working for the railroad, or deciding should you stay or not, but what is the advantages of working for a railroad. Right? What do I get with my Railroad Retirement? Do I want to make this jump into here? So like I say, I'm not going to comment on working for the railroad. I'm just going to tell you about Railroad Retirement. So if you want to put the comments in about how you like it or dislike it, feel free. Just keep it clean. All right?
So here we go on Railroad Retirement. Let's talk about Social Security first. So you have Social Security employees and you have Railroad Retirement employees. I don't want to talk about government workers. That's another thing. So if you're working in a Social Security job, your Social Security is going to be calculated on your top 35 highest earning years excluding any railroad service. Your railroad service does not count into Social Security. So your top 35 earning years. And if you were born 1960 or later, your full retirement age is going to be 67 as of the date of this. I don't know if they're going to change that.
Okay, so 67 is your full retirement age. Now, if you're married, your spouse would be eligible up to 50% of your Social Security at the spouse's full retirement age. And then also the survivor annuity from Social Security would be 100% of the higher of the two spouses' annuity. Once again, you are always going to have work deductions or age reductions, but let's just say full retirement age you're eligible for 100%. So that's Social Security. Straightforward. It's been around forever. Continue to be around.
But let's look at Railroad Retirement. Okay? See how this matches up against Social Security. So Social Security. Right? No, Tier 1 is your top 35 earning years of railroad service and Social Security service. So they take both of them as opposed to Social Security just doing that. So that's Tier 1. Think of that more like Social Security, the way that's calculated. Now, Tier 2 is the kicker. That's more like a pension, and you're paying into that through a deduction on your paycheck every month. And then the way they calculate it, I won't go into the formula. I got plenty of videos on Tier 2 on that. But it's basically your top five highest earning years is how they're going to calculate it. All right?
So that's really nice. So now you have your Tier 1, which is Social Security coming in at retirement, and then you have this other pension, this Tier 2 coming in. So now I got two sources of guaranteed retirement income coming in. Very, very powerful stuff. All right? Now here's another great one is, if you have 30 years of service, your full retirement age is no longer 67, it's now 60. That's seven years. All right? Seven years of your life. I don't know what you put a value on that, but that's got to be worth something. Right? Seven years of that. So that's very, very big.
Now, the next one here is, if you're married, is the spousal benefit. So just like Social Security, they get 50% of Tier 1. Right? We say that's kind of like Social Security. But this is great, 45% of the Tier 2, so that's another. So if you're married, that's like four streams of guaranteed retirement income coming in. Now, remember also the spouse, the spouse can start the spousal annuity at 60 also if the retiree's out at 60. So how fantastic is that? I mean that's some really great income coming in at 60. So that's really great. And then on the survivor part of it is 100% of the railroader's. So they'll get the railroader's Tier 1 and Tier 2, just assuming their highest amounts.
Also remember, there's always going to be work deductions if you're going to work, or if you're claiming early retirement there's age reduction. So there you go. I've kicked in my two cents on Railroad Retirement versus Social Security. It's a no-brainer if you're just looking at numbers. I don't want to get into the other stuff because I don't know the other stuff. But just looking at that, it's very good. It's very good by any stretch of the imagination. I hope you found this video helpful. Feel free to reach out to me, Boarding For Railroad Retirement, if you're at or near retirement. Click on the YouTube channel. Subscribe to it please. Click on the notification bell to get the latest video. Until next time everyone, please stay safe, stay on track, and take care. So long, everybody. Bye.
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