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Will My Railroad Retirement Keep Up with Inflation? Thumbnail

Will My Railroad Retirement Keep Up with Inflation?

Tier 1 Tier 2 Video Annuity Retirement Financial Planning


Are you concerned about inflation impacting your railroad retirement? You need to watch this video.

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 to talk about inflation. Can't get away from it. It's everywhere. It's in the newspaper. It's on the news. It's everywhere. All right.

So let's just talk about how it's going to impact on your railroad retirement. So first we'll go to our econ 101 class and just talk about inflation. Inflation is the rise in prices and the decline in purchasing power. Your dollar just doesn't go that far and everything's much more expensive. You see it everywhere. Okay. So that's inflation.

So how does it affect your railroad retirement tier one and tier two? So on tier one, it keeps... They get the adjustment every year and it keeps up with inflation. So that's great. But the CPI number, so maybe this year, this is filming in 2022. I think it might be an 8.6% number. That's a huge number for tier one to go up for the year for inflation. Just shows you how out of control it is, but I mean, it's normally around two, 1%. It's chaos. All right. So that's where it is this year.

Now however, the tier two number, all right. The second part of the annuity, very valuable part only increases at basically a third of that CPI number. So if we keep this thing going on, we're going to stay way... We're not going to keep up with inflation at all, but it's a third. So that's on your railroad retirement what you want to be thinking about.

Now, an important thing to remember about the tier two, when it comes to railroad retirement specifically, I'm addressing those railroaders that have left the railroad maybe 5, 10, 15 years ago, you have that tier two coming. Very important when you leave the railroad that tier two freezes. So let's say if you left the railroad in 2010, that tier two amount is what you would get in 2010. So there's been no inflation adjustments from any of that. So don't expect a big significant amount of money from that 'cause there's no inflation riders on that at all. So that's very, very important to understand.

Then the final thing I wanted to bring up is just... Hopefully this is just a one off for 2022, but remember your tier two funds are invested by the National Railroad Investment Trust. All right. Their job is to invest the money and grow so you can pay the railroaders off on their tier two benefits. However, very, very difficult to do if inflation's going to stay out of control because that's a certain amount of money they have to earn every year. Now this year in 2022, we don't know the numbers yet, but I'm going to expect that investment trust to have had returns at least of negative 15, 20% this year. Would not shock me at all to be around that 20% number.

So as railroaders, we don't want a fewer years of those. That wouldn't be good. If they've done less than 10 happy days for them, but I'd be shocked. But anyway, so I hope you found this information helpful on how inflation's going to affect your railroad retirement. Feel free to reach out to me if you're concerned about inflation with your railroad retirement plans. We can walk through a boarding for assessment process. Please subscribe to my YouTube channel. I appreciate that. Share this with other railroaders, keep them up to date on inflation. I'm sure they have big concerns on that also. So until next time everyone, please stay safe, stay on track and take care. So long everybody.

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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.