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Should I Collect Social Security Before Railroad Retirement? Thumbnail

Should I Collect Social Security Before Railroad Retirement?

Tier 1 Annuity Retirement Financial Planning

Why do railroaders collect social security when working for the railroad?

Welcome everyone to the Highball Advisors Railroad Retirement Whiteboard. My name is John McNamara of Highball Advisors. Today we're going to talk about railroaders that are going to try to collect social security while still working for the railroad. They figure, "I'll take the social security, while I'll work for the railroad." So I'm going to demonstrate to you or talk to you why that's a bad idea. Railroad retirement, tier one is what we're basically talking about here. Tier one is a combination of your social security and your railroad service. That makes up your tier one payment amounts. And as long as you're working, this number is still growing. Social security as a standalone is just made up your non railroad service years. So what will happen here is if you start collecting social security, let's say you're only 10 years in the railroad and you say, "I got 25 years of social security. I'll start collecting my social security."

So when you start collecting that, and then you say, "Oh, I'll flip over to railroad retirement when I retire, let's say at 67, because I'm 62 now," or something like that, those payments are going to affect what your tier one payout is going to be. So you're no longer going to get full credit for those years because it's not going to be your 67 social security age payment. It's going to be this reduced payment plus your railroads years of credible service. So you're going to get that reduced railroad retirement benefit. So you're collecting your social security now and doing that there. So just remember, social security, if you take that early retirement is a 35% discount to full retirement age. So if your full retirement age is 67, you're taking it at 62, it's a 35% discount.

So that's going to transfer over to railroad retirement because as we say, social security affects railroad retirement. However, railroad retirement doesn't affect your social security. And that's very, very important to understand. Also, if you want to go past your full retirement age, if you've collected your social security, you've given up the chance to earn an extra 8% a year. So the point here is I know you're the bird in the hand type scenario where you're saying, "Well, I can get some money right now," but you're really hurting yourself in the long run because you're not growing that money.

And I think at the end of the day, you want to get to a place with a spending plan where you say yourself, "Well, if I'm working, I don't need my social security." Because you got to pay taxes on that. It's not growing. So right there taxes and no growth is going to be very detrimental for you later in retirement.

So I hope you found this helpful, really focus down on it. I have some other strategies where you can flip it and take your railroad retirement earlier and take social security later. Check out my other videos on that. I'll put a link here on YouTube and you can check that out. But this strategy is a non-starter. Just because of the penalties and the lack of growth that you're going to get in your social security. Highly, highly advise against it.

I hope you found this helpful. Please put your comments down. I'll answer any comments if you need any more clarification on it. In the meantime, everyone, please subscribe to my YouTube channel. It's great. It's growing well. I appreciate all that. All the good comments. Thank you very much. And as always, 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.