Should I Work in Railroad Retirement?

Transcript:

Thinking about working in railroad retirement, watch this video to learn the deductions that might be affecting your retirement.

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 the deductions that will impact retirees from their railroad retirement annuity, if they decide to go back to work. So I'm just going to walk through, uh, some of the, uh, rules and regulations and, uh, things that you want to keep an eye out and then, you know, check to see how they, they apply to you. All right. So let's start off here on my right, your left, you know, the first thing, uh, very important, right? You cannot collect a railroad retirement annuity, if you were still working for a railroad or maybe moving to another railroad, you cannot collect a railroad retirement annuity. All right. Very, very important. So, you know, basically it all starts there. So if you're still working for the railroad and let's say you're a retirement age, you can't collect a railroad retirement annuity.

All right. Second item is a non railroad employer. Right? So that's what we're really talking about here, because for obviously first one off, if you worked for a railroad, no annuity, right. And the video turned off, however, if you're working, you say, okay, I'm retired from the railroad. I'm going to go get another job or, you know, do something. You're going to have reductions in your earnings. Okay. Assuming you're under the full retirement age. Right. So, you know, if you're born in 1960 and above, that's a 67 is your full retirement age. Uh, and then anything below that would be, uh, uh, you know, early, early retirement. So there would be reductions in your earnings. So in 2021, okay. When this video is going live, right, uh, is the number is $18,960. Right? So anything, if you make less than $18,960, there's no reductions in your benefits.

Okay. However, for every dollar over that amount, you'll lose $1 for every $2 earn. Okay. So what does that mean? That means that your annuity is now going to be smaller, right? This has nothing to do with taxation or any of that stuff. This is just a reduction in the benefit amount that you'll receive from the railroad retirement board. So every dollar that you make over that number for 2021, you lose $1 for every $2 earned. Okay. Now, so let's continue. We'll just to make everything easy. Uh, we'll continue with that person born in 1960 and later, because 67 is their full retirement age. So let's say you're in the months prior, you're going to hit 67 that a year. We'll say, uh, let's say your birthday's March okay. And you're gonna turn 67 of that year. Uh, so in the months prior, okay. You'll uh, you can earn up to 50,000, $250 and any amount over that will be $1 for every $3 earn.

Right. So that's a big, significant, uh, a reduction in the, uh, in the, uh, in the loss of the benefits. Okay. So that's, and this is all, this is very important. This is all on your tier one. Okay. Now also a railroad. Some of you may think, Oh, I, you know, um, my full retirement age, because I have 30 years is 60. No, these are social security rules. Okay. So even though you might have your 30 years, you've got to use your social security rules. So, uh, you know, 1960 and above, uh, your full retirement age is technically 67. All right. So there will be reductions, even though you say, well, I have my 16/30, it doesn't apply social security rules here apply. All right. So let's go to some other, uh, interesting little tidbits here. So they have a special one-year rule. What does that mean?

That means they're going to look at your monthly income and why they do that is because of that first year. Let's say you, uh, let's say you finish up with the railroad in August. Okay. Now obviously there's going to be no reductions in that, right. Because you're not retired, but however, let's say you get a part-time job for the last, uh, three months or four months, right? September, October, November, December. They want to know how much, um, uh, a month you're going to earn. So they, they break it down monthly for that first one year. So you can earn up to $1580 in a retirement for the rest of that calendar year. They always go to the calendar year. Okay. So the end of December, so anything over that is going to have the $1, a $1 for every $2 benefit loss. All right. So that's the special one year rule.

Now, this is also important for, uh, X, really EX railroaders. Okay. Who are still entitled to an, a, um, a railroad retirement annuity, right. It's working for your non railroad employer, uh, pre retirement and post retirement. Right. So, um, you're no longer in the railroad. Okay. However, you're entitled to a railroad, uh, annuity. You're working for a company and let's say, Oh, you know what? I'll just collect my railroad retirement and still continue working. Okay. There's going to be a penalty for that. All right. So not only this penalty here that we talk about, which is on your tier one, they're going to the railroad retirement board is going to come after the tier two, also $1 of your tier two, uh, for every, uh, $2 in tier two. Right. So you're going to lose $1 for every $2 of your tier two up to 50% of the value of your tier two.

All right. So that's a big penalty. So that's important though. So let's say you work for, uh, some company collect railroad retirement. Then you continue to work for that company in railroad retirement. Your tier two penalty is going to come into play there. Okay. So, uh, let's go over here and we'll finish up with what earnings count. All right. So the railroad time, report's going to look at your railroad or non railroad earnings. So obviously if they look at your railroad earnings, they go, well, we're not paying you anything because, uh, it's not payable. So they're going to look at all your earnings. So they'll look at your W2, which is your gross wages. And then let's say, if you're, self-employed, they're gonna look at your net earnings of a, your self-employment history. Okay. Those are, and then what doesn't count. Okay. Or is interest earnings, uh, interest, income, pensions.

Some of you might be collecting pensions, all right. Uh, gifts, inheritances, inheritances, and, uh, capital gains. Right? So it's, so it's basically working is, is how you want to look at it. That's where the reduction, uh, penalties are going to come into play. So I hope you found this helpful, you know, um, you know, some of you might want to be looking at working, right. Especially, uh, help supplement as you get nearer towards Medicare, right? 65, you might have some years, you might want to work there. Uh, but you got to understand the deductions that are going to come into play. Remember this, isn't your taxes in retirement. This is your deductions. I just want to emphasize that one more time. So, uh, I hope you found this helpful. Please reach out to me, uh, doing those boarding forever retirement assessments. Very important for those individuals who are closing in on retirement. So great. Start get that roadmap, get things in place to understand how your railroad retirement is going to look, um, as always, please subscribe to the YouTube channel it's been going great. It's been growing really well. I want to thank everybody for that. Uh, click on the notification bell, like the video, do whatever you want to do, share the video, all those great things. So until next time, 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.