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The First Year of Work in Railroad Retirement Thumbnail

The First Year of Work in Railroad Retirement

Tier 1 Tier 2 Video Annuity Retirement Financial Planning


Planning on working when you start your railroad retirement? You need to watch this video.

Welcome everyone. To another addition of the Highball Advisors Railroad Retirement Whiteboard, my name's John McNamara of Highball Advisors. And today we're going to talk about those railroaders that leave the railroad and they want to work, right? So what they have now is what they call... Well, I should say they've always had it, is they have what they call a special one year rule. So if you remember, if you're under your full retirement age, you're going to have work deductions for collecting your annuity and continue to work all. So let's go over it. It's called the Special One Year Rule, and it only applies to the first year of when you're collecting that railroad retirement annuity. Now, when I say the first year, I just mean the calendar year. So if you start railroad retirement in May, this will only count till the end of December.

It's not a full year. It's just till the end of the calendar year. So if you start November, it's just two months, November, December, then the full deductions for the year would start in 2023. All right. And it's for under full retirement age, remember you got $1 reduction for every $2 earned over the earnings limit amount. So, and it only applies to tier one portion. Tier two is separate. Okay. And so in 2022, it's $19,560. Any amount over that you would lose $1 over $2 under your full retirement age. All right. And then the 2023 earning, so how much can you earn every month is $1,630 until the end of the year from when your annuity starts and this number happens to be one 12th of this number. So that's how they came up with that. So let's go through an example and I'll walk you through it and see if this helps you out here.

So let's say a railroader, he's going to retire at the end of August and he's earned $80,000 for the first, let's say August, eight months, all right. And he retires in August and his annuity begin dates September. So he is going to start in September. However, he still wants to work. Maybe he is going to work part-time, collect some health insurance or something or just do something. So let's say he has a job for $1,000 dollars a month. So now you're saying yourself, "Well, geez, John, he's well over the $19,560," no, they don't count this $80,000 because the annuity hasn't started yet. So they say to the Mr. Railroad, "You can earn up to $1,630. Then the deductions will come in." So he's only earning a thousand, so there'll be no penalty to him. So there's no earnings deductions.

Now remember though, in 2023, that's going to reset now to $19,560. So that's that Special One Year Rule, that first year don't stress about the... Say, "Hey, I earned all this money." No, it only... Once the annuity starts, that's when you have to worry about the monthly amount and then it's going to reset into the beginning of the calendar year. So I hope you found this video helpful. If you have any issues about this, please reach out to me. If you're nearing retirement, like I said, this is important stuff, right? This is all about planning for retirement. "Hey, I'm going to work in retirement." "No, I'm not going to work in retirement." This is all part of the stuff that I'll go through in the boarding for railroad retirement assessment. For those railroaders near retirement. It's really great value there. So, sign up for that. Please subscribe to this video, share it with other railroaders. Like to spread the word a little bit, click on the notification bell to get the latest video. And 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.