What You Need to Know About Tier 1 in Railroad Retirement
Tier 1 Video RetirementTranscript:
Learn the essential information of your Tier 1 benefit in railroad retirement.
Welcome, everyone to another edition of the Highball Advisors Railroad Retirement Whiteboard. My name's John McNamara of highball Advisors. And today we're going talk about your tier 1 benefits. So I get a lot of inquiries from railroaders, "Hey, explain tier 1 to me.", or frankly, I get a lot of inquiries from financial advisors saying, "Listen, I have clients, I don't know anything about railroad retirement. Can you help me out?" So I finally put together a high level video for everyone just to give you some good working knowledge of railroad retirement stuff that you can tell your buddies and all those type of things. So if you want to do the deep dive, "Hey, how's it calculated." All those type of things. I did a video basics of tier 1 and railroad retirement. Check that out. That will explain to you how you get to your number and all that stuff.
But let's just go over the basics here. And this, like I said, will give you a good working knowledge. So the way I break it down is railroaders with less than 30 years when they retire and then railroaders with 30 years or above of service, when I say service. So if you're less than 30 years, it's social security. Social security rules apply. That's all you need to know. So check out all your social security rules and you can get into that. 62 is the earliest that you can retire and collect your tier 1. And obviously at 62, there's a 30% re reduction for those born 1960 and later, but that's social security rules. So that's very simple. The first question is, "Hey, how many years do you have?" Okay, well, it's less than 30, social security rules, very straightforward.
Now it's when you have 30 years or more, this is when it gets interesting. So you can collect at 60, two year difference there, if you have 30 years. You can start your retirement benefits. So your full retirement age is now 60 versus here, full retirement age is 67. So that's seven years difference. Huge difference there. And then your first two years from a tax paying perspective, from 60 up to 62, that's going to be taxed as ordinary income. That's called a non social security equivalent benefit, NSSEB. So that's how that's going to get taxed. Then at 60, no reductions. It's your full retirement age. Remember, here are at 62, you have a 30% reduction. However you get to the 30 years, no reductions, very important.
And then finally, if you're married and have a spouse, your spouse gets to full retirement age, or I should say collect their spousal railroad retirement annuity is at 60, assuming that the railroader turns 60. So he if he or she's older and you're younger, you still can't collect until the railroader turns 60. So those are the differences in tier 1. So it's really different, seven years, no reductions. It's a big deal, 30 years. So I hope you found this helpful. Share this with other railroaders so they get a good understanding of tier 1, very important. Reach out to me if you have any questions. I have a boarding for railroad retirement process, which goes through, understands your tier 1 benefit in railroad retirement, which is great. Subscribe to YouTube channel, click on the notification bell to get the latest videos, appreciate the channel's growing great. So that's good stuff. 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.
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