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Retirement planning.

Are You Financially Prepared for Retirement?

Most of us have been looking forward to the day we can finally enjoy retirement. However, before you decide to retire, it is essential that you are financially ready to retire. Ask yourself these questions: 

  • Have I saved enough money?  
  • When can I stop working?  
  • How long will my retirement savings last? 
  • Will I be receiving enough benefit income to sustain my lifestyle? 

You may want to speak to a financial advisor, or you can simply use a retirement calculator to determine the amount you need to ensure you have enough money to feel financially secure when you retire. You can find many retirement calculators online. Here is a link to one we find very helpful: 

What Does a Retirement Calculator Do? 

You will be asked questions about your current salary, benefits estimates, such as your railroad retirement income or 401(k) and IRA, any current savings you may have set aside, the age you wish to retire, and household expenses. Your household expenses include bills or miscellaneous items such as a mortgage, groceries, gas, phone bill, car note, insurance, taxes, etc. Once you enter this information into the retirement calculator, it will give you an analysis of how much you need to have saved to be financially secure during your retirement. 

How Much Should You Save for Retirement? 

It is never too late to start saving for retirement. For example, if a person at the age of 50 puts $5000 a year into an IRA, they will have $186,860 saved if they plan to retire at age 70. One thing to consider is how long you will need the money to last. Of course, we all know there is no way to determine when we will die, so most financial advisors recommend having enough money saved with a plan that you will live to be 90 or older. If you have relatives who lived longer, you may want to plan for additional years.  

In the United States, the full retirement age is 67 for those born in 1960 or later. At this age, you can start collecting benefits. If you worked for the railroad, you should already know you will be receiving railroad retirement benefits rather than social security benefits. The railroad benefits work similarly to social security benefits regarding when you can begin to receive them. Railroad retirement benefits are generally first payable at age 62, with the full retirement age ranging from 65 to 67 based on your date of birth. However, railroad retirement benefits do differ from social security benefits in 2 ways. 

If a person worked for the railroad for over thirty years, early retirement reductions do not apply. In this case, a person can receive benefits as early as age sixty. The second difference is that a supplemental annuity is payable if an employee had at least 25 years of service, which began before October 1, 1981, and is still connected to the railroad. At age sixty, if the person has at least thirty years of service, and at age sixty-five, if they have at least twenty-five to twenty-nine years of service, they are eligible for the supplemental annuity. The maximum amount of this supplemental annuity is $43 a month. 

To know how much you need to save for retirement, you will need to know how much you will receive in monthly benefits. Railroad workers with fewer than ten years of service, or five years after 1995, are not vested under the Railroad Retirement program, and their accounts are transferred to social security. If you do qualify for railroad benefits, they are based on a Tier I and Tier II program. Tier I is calculated similarly to social security benefits. Yet the Tier II benefits differ from social security in that they resemble a private pension.  

The Tier II benefits are calculated by computing average monthly earnings from the employee’s highest sixty months of wages. The figure is then multiplied by seven-tenths of 1 percent, and again by the years the employee spent working for the railroad. These benefits have cost of living adjustments. In a recent previous blog, we discussed the rise of these benefits. Once you have determined how much you will be earning in monthly benefits, you will better grasp how much you need to save for retirement and when you can retire. 

NARVRE Protects Your Railroad Retirement Benefits 

If you worked for the railroad and will be receiving Railroad Retirement benefits, you should join NARVRE today. NARVRE works diligently to PROTECT, PRESERVE, and PROMOTE your benefits. We keep you up to date on any challenges to your benefits, and we work to ensure you are never denied your hard-earned money. The membership fee is less than $30 a year. That isn’t much, considering the peace of mind this membership provides. You can find your local NARVRE unit on Facebook or speak to your local affiliate to join NARVRE today. 

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