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You Might Want to Take This for Railroad Retirement Thumbnail

You Might Want to Take This for Railroad Retirement

Video Retirement Financial Planning Estate Planning


Learn about this one benefit you might want to take when you leave the railroad.

Welcome, everyone, to another edition of the Highball Advisors' Railroad Retirement Whiteboard. My name's John McNamara of Highball Advisors, and today's topic, we're going to talk about a company benefit that a lot of people take, not just railroaders, but people in general take for granted. And that's the life insurance policy that your railroad gives you, alright? Normally it's around two times the size of your salary. Could be more sometimes and some railroads, they might give it to you free, or there might be a small debit from your paycheck to pay for the life insurance. And, then what happens is, "Oh, I'm leaving the railroad. I'm retiring," perhaps, and it just lapses. And then you don't have that life insurance anymore. But let's talk about things that we can do with that because there's some strategies here that might pertain to you.

So what am I talking about? You have employer life insurance, and you can convert that to an individual policy. So you have the company and then it becomes individual. And what's nice about that is you already have the insurability there. They can just convert it. So it's called a conversion or portability option in your policy. The railroad is obligated to give you notice of the conversion rights. So it's very important to go get that policy and take a look at it and see what the conversion rules are and obligations that you have to convert that to an individual policy. So, and then some of the details on it, it's usually the same insurance company that the railroad already has, will be the same. Now the policy can't be in excess.

So I mentioned it's sometimes two times the salary. You can't say, "Hey, I need 10 times the salary." So, you can't do that. And then you also need to apply within the listed time. So, you can't go back and say, "You know, I left the railroad 90 days ago. Hey, can I get that life insurance now?" It doesn't work like that. So that's why I say go back there and get those rules and obligations and know that because these are all the little things that you have to understand when you're leaving the railroad. So this is one of the benefits. So why as railroaders should you get it? Easy way to get coverage. That's the first thing. So you go through life insurance, you got to do all the healthcare tests sometimes and all these things.

Well, you already have that part. So, that's a good way to get that coverage straight away. Another thing I like is it helps protect the survivor annuity, if you're losing your connection. I always say that's a big thing because if you're losing your connection and you're going to work somewhere else, it's a great way to protect that survivor annuity. Because remember, you go work for a non railroad employer, the survivor annuity is gone, because you've lost your connection. And then also another thing I saw was a good bridge to retirement. So let's say you're 57, 58. You already have your 30 years. You're just punching the clock, waiting until 60. Hey, why not go get two or three years of insurance to cover you until retirement, and it's an easy option there. So definitely want to explore that. Some other important stuff, like I said, get that current policy, understand the conversion very important.

So that's a good action item. And then once you're converting, get it in writing just to say, "Oh yeah, you converted." No, get everything in writing. I'm always big, especially with insurance policies, any type of policy, get everything in writing. So this is one strategy that you really want to think about if you're leaving the railroad. Great way to actually protect that survivor annuity and actually help bridge that gap into retirement.

I hope you found this helpful. Reach out to me, if you have any questions. And, subscribe to the YouTube channel, click on the notification bell. Get the latest videos. I usually put out two a week. 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.