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What Your Need to Know about Your Survivors Annuity in Railroad Retirement Thumbnail

What Your Need to Know about Your Survivors Annuity in Railroad Retirement

Tier 1 Tier 2 Video Annuity Spouse Annuity Retirement


Learn what happens to your family if something unfortunately happens to you.

Welcome everyone to another edition of the Highball Advisors Railroad Retirement Whiteboard. My name's John McNamara of Highball Advisors. Today, we're going to talk about what I consider one of the most important subjects, taking care of the family, the survivor annuity. The Railroad Retirement board, as you work, you're paying into Railroad Retirement for your service and age annuity and then your spouse annuity if you're married. Then, what they also provide is a survivor annuity. If you go before your family, before your wife or your children, they provide a survivor annuity, a stipend so that your family could survive without you. What I thought, in this video, is I'll just go over the basics, high level stuff to get you starting to think about the survivor annuity and things that you can do. So, if you come into this situation, you'll have some working knowledge to start with when you have a conversation with the Railroad Retirement board.

So, let's talk about the survivor annuity and what it is. It's a monthly benefit paid to the widows, the spouse, children, and that's certain requirements, and I'll get into that a little bit later, and then other dependents. That might be maybe your parents if you're supporting them. There's certain requirements there for that type of survivor payment. All right.

Now, in order to get the survivor annuity, this is the important part, and this is where it gets a little bit tricky. So, you really got to pay attention to this part. You need the five years of service, that connection with the railroad, five years of service after 1995. Before 1995, if you worked, you need that 10 years of service. Now, you need the current connection. So, check out my video, Current Connection Railroad Retirement. That will go through it, but very important, 12 months of service in the last 30 months. That gives you that current connection, or if you leave the railroad and don't take, basically, a W-2 job, as I like to say, before you start your annuity, that will keep your connection, also, or if you retire and become self-employed, you can keep your connection anyway, but that's very, very important is that current connection for the survivor annuity because, if you lose the survivor annuity and something unfortunate happens to you, here's the penalty. No current connection and the family goes into Social Security.

What does that mean? That means you're losing the tier two benefit, which is probably the most important part, especially if you're a railroader with 25, 30, 35 years. That's a significant amount of money that just goes by the wayside if that current connection is lost. So, very, very important. There's some strategies you can do to protect that. If you do take another job, you can do that through term life insurance, that type of thing, just to protect that annuity, very, very important.

Let's keep going on the survivor annuity here. The payments, for widows 60 and over, you can start collecting; children, if you have a child in the house under the age of 18, they can collect a survivor annuity. If you have disabled children, there's also survivor annuity. As I mentioned before, if you, let's say, supporting your parents or something, elderly parents, paying over 50% of their support or what they need to survive, you can have annuity on there. There's a lot of different formulas on that. All right.

Let's go through an example here. Okay? This is important. Let's just take a railroader, and let's say they've retired, and they have a tier one of 2,000 and tier two of 1,000, which case the spouse would have 1,000, half of tier one and 45% of tier two. That's a great amount of income there. This is assuming they have their current connection when they started their annuity. All right? Now, something unfortunate has happened to the railroader. So, basically, what would happen is the spousal annuity would go away, and this would roll into a survivor annuity, in which case, they would get $2,000 and then $1,000 of the tier two. That's just a very clean example of the survivor annuity.

Now, obviously, a lot of situations come up where maybe the spouse was working, and let's say she was working, and she paid into Social Security all those years. What's important to remember, and this is another Social Security rule applies, Social Security or tier one, those are the rules, limit to whatever the highest amount is is what they're going to be. So, you can't say, "Oh, I'll take the tier one survivor here. I've paid into Social Security, and I'm supposed to get another 1,500. That will be $3,500 I should be getting." No, it's going to be the higher of the two amounts. So, if it's 2,000 and 1,500, the 2,000 amount will supersede, or if you have a higher Social Security amount of, let's say, 2,500, this will go away. So, it'll be 2,500 and 1,000. All right?

So, there's a lot of moving parts here when it comes to survivor annuity. I mean, Railroad Retirement's confusing enough as it is. Throw a survivor annuity on there. It gets even more difficult, but just to highlight again, it really all starts with that current connection. Understand your current connection, very, very important. All right?

I hope you found this video helpful. Reach out to me if you have any questions. This is really important stuff. If you're getting near to retirement, reach out for the boarding for Railroad Retirement process that I go through. It's a free assessment, really lays a lot of this stuff out for you. All right? Share this video with other railroaders. This is, like I said, very important. Share it with them. Oh, also subscribe to the YouTube channel. I do appreciate that, and click on the notification bell, get the latest video, but 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.