Will Living Off Annuities in Early Railroad Retirement Break My Current Connection?

Will Retiring at 57 and Living Off Annuities Break My Current Connection?

Welcome back to another edition of the Highball Advisors Railroad Retirement Mailbag! I’m John McNamara, founder of Highball Advisors, and today’s question comes in from Chris S., who’s planning a unique retirement strategy.

Chris asks:

“I’m planning to retire at 57 with 25 years of service. I want to live off my investment annuities from age 57 to 62, then begin collecting my Railroad Retirement at 62. Will this break my current connection?”

Great question, Chris—and one that a lot of early retirees ask.

Let’s break it down:

Understanding the "Current Connection" Rule

The Current Connection is a critical piece of your Railroad Retirement benefits. It helps determine your eligibility for certain Tier 2 survivor benefits and whether you qualify for railroad-specific benefits versus Social Security.

Here’s the key rule:

✅ You must have 12 months of railroad service in the 30 months immediately before your retirement.

That’s what the RRB (Railroad Retirement Board) looks at when evaluating your current connection.

Will Living Off Annuities Break the Current Connection?

In your case, retiring at 57 with 25 years of service and living off annuities until 62 should not break your current connection as long as you don’t take another W-2 job outside the railroad industry during that time.

🚫 Taking a W-2 position with a non-railroad employer is the biggest risk to breaking your current connection. ✅ Living off investments, annuities, or passive income is perfectly fine and will not impact your current connection.

So if you're just drawing from your investment accounts and not working in a non-railroad W-2 role, you should be in the clear.

Should You Wait Until 62—or Work a Few More Years?

That’s a separate question—and one worth considering.

Since you have 25 years of service, you’re not eligible for the 30/60 full retirement benefit that long-time railroaders enjoy. You may want to run the numbers to see if working just a few more years to reach 30 years of service is worth it financially.

Even if you don’t go all the way to 30 years, extending your working years to increase your Tier 2 benefits might be worth considering.

A Note About Annuities

Chris, you also mentioned living off annuity income between 57 and 62.

While it sounds like you've built a solid investment base, I generally don’t recommend that railroaders purchase annuities to fund retirement. Why?

Because you’re already funding an annuity-like system—Tier 2 of Railroad Retirement. You’re essentially paying into a defined benefit plan that works a lot like an annuity.

💡 Buying a private annuity on top of that may duplicate what you're already getting through Tier 2—and often at a higher cost with less flexibility.

I go into this in more detail in my video: 🎥 8 Reasons Not to Buy an Annuity for Railroad Retirement https://youtu.be/_GmRdeRvosM

Final Thoughts

Thanks for your question, Chris. It sounds like you’ve built a strong retirement strategy, and as long as you avoid W-2 employment after leaving the railroad, you’re in a good position to preserve your current connection.

That said, it’s always worth doing a little math on whether a few more years of work could give you a better long-term outcome.

Have a Question?

If you’re a railroader with a retirement question—big or small—send it my way! I might feature it in an upcoming Railroad Retirement Mailbag video or blog.

And don’t forget to check out my retirement planning sessions at Highball Advisors to make sure your plan is on the right track.

Until next time—

Stay safe, stay on track, and take care. —John McNamara, Highball Advisors

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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.