Welcome, everyone, to another installment of the Highball Advisors Railroad Retirement whiteboard series. I'm John McNamara, representing Highball Advisors. Today, we're diving into the topic of the Railroad Retirement Board and the crucial moments when you should reach out to them if you're considering working during your retirement. This is a crucial aspect that can save you from potential complications down the line, so understanding when to contact them is paramount.
Let's break it down step by step. Firstly, earnings from non-railroad employment. These earnings can result in deductions from your Tier 1 and Tier 2 benefits before reaching full retirement age. Tier 1 follows the basic Social Security rules, so there's generally no need to contact the Railroad Retirement Board about it. However, I'd like to highlight the Tier 2 portion because it involves situations where you may have worked for your last previous employer. This often occurs when you retire from the railroad, take up another job, and then start your annuity. To avoid any confusion or potential deductions, it's wise to contact the Railroad Retirement Board and confirm who your last previous employer on record is with them.
Now, let's venture into the more complex territory of self-employment after starting your annuity. If you engage in self-employment, the Railroad Retirement Board will assess whether you're performing substantial service as an independent contractor. This can be a gray area with potential complications. If your self-employment is in a field unrelated to the railroad, the Railroad Retirement Board typically does not consider it as self-employment for their purposes. For example, if you retire from the railroad and decide to open a roofing business, you need not notify them about it.
However, things get trickier if you are employed as a consultant, especially for a railroad, including your previous employer. In such cases, the Railroad Retirement Board will scrutinize your self-employment situation. To navigate this scenario correctly, you must complete a form AA-4, the Self-Employment and Substantial Service Questionnaire. The Railroad Retirement Board will then assess whether you are effectively working for the railroad. If they determine that you are still employed by the railroad, your annuity payments may cease because you are technically still working, and your Tier 2 portion will continue to accrue. It's essential to comply with these procedures because failing to do so can result in significant interest and penalties.
In summary, it's advisable to err on the side of caution and consistently reach out to the Railroad Retirement Board to ensure that all necessary steps are taken. I hope you find this information helpful, especially if you're considering self-employment during your retirement. As our channel continues to grow, nearing the 7,000 subscriber mark, I want to express my appreciation for your support. Please click the notification bell to stay up to date with our latest videos. Until next time, remember to stay safe, stay on track, and take care. Goodbye, everyone!
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.