Railroad Retirement

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Topic Author
Finley2021
Posts: 27
Joined: Sun Jul 26, 2020 10:52 pm

Railroad Retirement

Post by Finley2021 »

Good evening: 6 years away from retiring, and at that time I will have 40 years in railroad retirement. I am in the NH area. The only railroad retirement specialist I have found is in South Carolina and I am sure that I would NOT be comfortable handing my entire life savings over to someone that far away. Railroad Retirement is unique and I am looking for a firm in New England to help me out. What should I look for?

Any guidance you have would be appreciated. Should I be concerned with someone that far away that I do not know?

Thank you
Somethingwitty92912
Posts: 155
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Re: Railroad Retirement

Post by Somethingwitty92912 »

Giving you a bump here, mostly due to my own interest. What’s different about a railroad retirement?
jackbeagle
Posts: 143
Joined: Sat Mar 06, 2021 5:22 pm

Re: Railroad Retirement

Post by jackbeagle »

Railroad retirement should be a pension. The fund cuts you a check and You shouldn't be "handing over" anything to anyone. What are your goals by trying to contact an advisor regarding your pension? Are you trying to get a lump sum?
123
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Re: Railroad Retirement

Post by 123 »

There are many financial advisers that market themselves to particular occupations or careers, such as for teachers, doctors, firemen, police, etc. Sometimes they market themselves as experts in specific retirement plans, like a plan offered by a particular state, union, or other group. Yes they will make their target audience comfortable because they can drop a lot of catch phrases about the particular trade or occupation. But their goal is to move whatever money is available, such as from a 401k or other retirement plan into something they offer and extract sales commissions and AUM fees. When someone advertises that they are for a particular trade or occupation they are letting you know that they are experts at distraction while they are picking those pockets.
The closest helping hand is at the end of your own arm.
Beachey
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Re: Railroad Retirement

Post by Beachey »

Are you referring to US Railroad Retirement Board that is essentially a parallel system to Social Security? My wife worked for the railroad for a few years but never vested. I thought there were Offices in most major cities, my guess in Boston if not closer.

The uniqueness is a Tier 1 and Tier 2 system. Tier 1 is designed to mirror Social Security whereas Tier 2 is an additional pension on top. If you are trying to determine when to claim as compared to the discussions on this board of the best Social Security claiming strategy there likely are a limited number of people who can help with that. I would think the Railroad Retirement Board would be your best option. If you are covered by an agreement (i.e union member) - you can ask your union rep as well.

It is not clear how you would be handing over your money to the contact in South Carolina

ETA: Quick Google Search brings up the firm you most likely are seeing in South Carolina who is a financial advisor who charges based upon assets under management but has developed some expertise with Railroad Retirement. The general advice is that a fixed fee advisor is generally a better choice. While your Railroad Retirement is a little different than Social Security(if memory serves you can collect before 62 if you have enough years) treating it as Social Security and a pension most likely will get you to a reasonable plan. I am sure you can find a fixed-fee advisor in New Hampshire who can help.
Last edited by Beachey on Tue Jun 08, 2021 7:14 pm, edited 1 time in total.
Small Savanna
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Re: Railroad Retirement

Post by Small Savanna »

Do you have former colleagues you worked with who retired under the same system? If there are some that you trust and could contact, that might be a good place to start.
delamer
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Re: Railroad Retirement

Post by delamer »

Beachey wrote: Tue Jun 08, 2021 6:53 pm Are you referring to US Railroad Retirement Board that is essentially a parallel system to Social Security? My wife worked for the railroad for a few years but never vested. I thought there were Offices in most major cities, my guess in Boston if not closer.

The uniqueness is a Tier 1 and Tier 2 system. Tier 1 is designed to mirror Social Security whereas Tier 2 is an additional pension on top. If you are trying to determine when to claim as compared to the discussions on this board of the best Social Security claiming strategy there likely are a limited number of people who can help with that. I would think the Railroad Retirement Board would be your best option. If you are covered by an agreement (i.e union member) - you can ask your union rep as well.

It is not clear how you would be handing over your money to the contact in South Carolina

ETA: Quick Google Search brings up the firm you most likely are seeing in South Carolina who is a financial advisor who charges based upon assets under management but has developed some expertise with Railroad Retirement. The general advice is that a fixed fee advisor is generally a better choice. While your Railroad Retirement is a little different than Social Security(if memory serves you can collect before 62 if you have enough years) treating it as Social Security and a pension most likely will get you to a reasonable plan. I am sure you can find a fixed-fee advisor in New Hampshire who can help.
Just as a FYI, I don’t believe there is an option of deferring Tier 1 while collecting Tier 2. But I agree that the Railroad Retirement Board would be the best information source.

If OP is looking for help managing investments, then I don’t think s/he needs someone with familiarity with Railroad Retirement.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. | | Alexandre Dumas, fils
Topic Author
Finley2021
Posts: 27
Joined: Sun Jul 26, 2020 10:52 pm

Re: Railroad Retirement

Post by Finley2021 »

Thank you all for the advice and BEACHEY - your google search is correct. That's the guy. I guess I'm mostly concerned about my 401K that I have been growing for 35 years. Everywhere you turn these days, dishonest people try to take advantage. Most of you all probably manage your own accounts and I have 6 years to learn. The tax part of it is why I may look for help.

If I am hearing everyone correctly, a fixed fee advisor is what I may look for. Fiduciary also?

Thanks again.......
tj
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Re: Railroad Retirement

Post by tj »

Finley2021 wrote: Tue Jun 08, 2021 10:58 pm Thank you all for the advice and BEACHEY - your google search is correct. That's the guy. I guess I'm mostly concerned about my 401K that I have been growing for 35 years. Everywhere you turn these days, dishonest people try to take advantage. Most of you all probably manage your own accounts and I have 6 years to learn. The tax part of it is why I may look for help.

If I am hearing everyone correctly, a fixed fee advisor is what I may look for. Fiduciary also?

Thanks again.......
There's no magical way to avoid taxes on your retirement distributions. You could do Roth conversions, but I doubt any of those FA's have a clue about them.
delamer
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Re: Railroad Retirement

Post by delamer »

You could start with one of the Boglehead books recommended here: https://www.bogleheads.org/RecommendedReading.php

That would give you some background to evaluate any advisor or help you decide whether you can handle your investments yourself.

Depending on your Tier 1 & 2 benefit level, you might run into issues with high taxes and/or Medicare costs once you start having to take required minimum distributions (RMDs) from your 401(k).

Consider posting your information in this format: viewtopic.php?f=1&t=6212

Then you’ll get good advice frm the forum on what issues might arise.

Good luck.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. | | Alexandre Dumas, fils
iamblessed
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Location: St. Louis

Re: Railroad Retirement

Post by iamblessed »

Just curious what is the pension after 40 years?
123
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Re: Railroad Retirement

Post by 123 »

Here's a comparison of SSA and RRB benefits:https://www.rrb.gov/sites/default/files ... maxben.pdf

RRB benefits are funded by taxes on the employee and the employer (the railroad). Tier 1 RRB benefits produce pretty much the same as SSA. There is an additional tax on the employee and the employer (the railroad) for the Tier 2 benefits.

RRB benefits can be significantly higher than SSA benefits due to the higher taxes on the employee and the employer and the greater benefits those produce over a lifetime of work for the railroads.

The availability of jobs in the railroad industry that pay the maximum salary producing the maximum benefits may be limited.
The closest helping hand is at the end of your own arm.
delamer
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Re: Railroad Retirement

Post by delamer »

iamblessed wrote: Wed Jun 09, 2021 1:37 pm Just curious what is the pension after 40 years?
It’s going to vary based on pay level. And there is a cap just like with Social Security.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. | | Alexandre Dumas, fils
iamblessed
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Location: St. Louis

Re: Railroad Retirement

Post by iamblessed »

delamer wrote: Thu Jun 10, 2021 9:55 am
iamblessed wrote: Wed Jun 09, 2021 1:37 pm Just curious what is the pension after 40 years?
It’s going to vary based on pay level. And there is a cap just like with Social Security.
I knew some railroad guys in the 80's getting 2k a month. It was a nice pension in the Midwest at the time. It might be closer to 3k today.
delamer
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Re: Railroad Retirement

Post by delamer »

iamblessed wrote: Thu Jun 10, 2021 11:28 am
delamer wrote: Thu Jun 10, 2021 9:55 am
iamblessed wrote: Wed Jun 09, 2021 1:37 pm Just curious what is the pension after 40 years?
It’s going to vary based on pay level. And there is a cap just like with Social Security.
I knew some railroad guys in the 80's getting 2k a month. It was a nice pension in the Midwest at the time. It might be closer to 3k today.
In addition to the railroad employee’s annuity, spouses get an annuity for both Tier 1 (or their own Social Security, whichever is higher) and Tier 2. So it can add up for a married couple.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. | | Alexandre Dumas, fils
Topic Author
Finley2021
Posts: 27
Joined: Sun Jul 26, 2020 10:52 pm

Re: Railroad Retirement

Post by Finley2021 »

Thank you all. Your pension amount is based on five highest earning years - which is usually the last five for most people.

Great information. Thanks again.
BradJ
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Re: Railroad Retirement

Post by BradJ »

I will add a little "financial folklore" to this discussion. I have heard rumors that a specific railroad company doesn't require you to pay SS and your spouse gets a pension in addition to yours. I guess the overall thought is the schedule is so insane you might as well pay the spouse for putting up with it. Again, just rumor....................
delamer
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Re: Railroad Retirement

Post by delamer »

Finley2021 wrote: Fri Jun 11, 2021 7:38 am Thank you all. Your pension amount is based on five highest earning years - which is usually the last five for most people.

Great information. Thanks again.
That’s right for Tier 2.

Tier 1 is very similar to Social Security. In fact, If you have Social Security credits, those get included in your Tier 1 calculation. And vice versa.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. | | Alexandre Dumas, fils
delamer
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Re: Railroad Retirement

Post by delamer »

BradJ wrote: Fri Jun 11, 2021 8:23 am I will add a little "financial folklore" to this discussion. I have heard rumors that a specific railroad company doesn't require you to pay SS and your spouse gets a pension in addition to yours. I guess the overall thought is the schedule is so insane you might as well pay the spouse for putting up with it. Again, just rumor....................
Railroad employees don’t pay into Social Security; they pay into its equivalent, Railroad Retirement Tier 1. It’s industry-wide.

Tier 2 does provide a small annuity to spouses.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. | | Alexandre Dumas, fils
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Monster99
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Re: Railroad Retirement

Post by Monster99 »

My father retired from the railroad in the mid nineties and when he passed, I did my mother's taxes for 18 years. You get a form from the RRB that looks like the SSA 1099 with the information needed for taxes. The Tier 2 portion of his contained a voluntary employee contribution that the tax was calculated under the "general accounting rule" which was a bit tedious but once you figure it out it was straight forward.(I think this has changed, but not sure) Turbotax did a fair job of the federal tax calculation, but for the state it was a bit wonky.... Over the years the tax programs have improved quite a bit and we didn't get audited, so I guess I did ok....🥴
michaeljc70
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Re: Railroad Retirement

Post by michaeljc70 »

delamer wrote: Thu Jun 10, 2021 12:10 pm
iamblessed wrote: Thu Jun 10, 2021 11:28 am
delamer wrote: Thu Jun 10, 2021 9:55 am
iamblessed wrote: Wed Jun 09, 2021 1:37 pm Just curious what is the pension after 40 years?
It’s going to vary based on pay level. And there is a cap just like with Social Security.
I knew some railroad guys in the 80's getting 2k a month. It was a nice pension in the Midwest at the time. It might be closer to 3k today.
In addition to the railroad employee’s annuity, spouses get an annuity for both Tier 1 (or their own Social Security, whichever is higher) and Tier 2. So it can add up for a married couple.
Yes. My mother gets half of what my father gets even though she never really worked. The result is they make more in retirement than when my father was working (before adding in investments).

As to the OP's situation, I don't think they need someone who specializes in RR.
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