The Railway Retirement System is a national retirement program for American railway workers. Understanding the benefits, as well as the structure of this unique system, can help you plan and achieve financial security.
Railway workers do not participate in the social security system. Instead, they pay more taxes than most employees who pay social security. According to the Railway Pensions Act, these taxes are directed to the railway pension system. They are used to finance primary pension benefits for railway workers and an investment fund that generates income for the fund Pension.
The railway pension system, although separate and parallel to the social security administration, is controlled by the administration and the pension council of the railways. The Social Security Administration charges fees to fund the program. At the same time, the Railway Pensions Board is responsible for distributing benefits to eligible railroad employees and their families to ensure income during retirement. These two governing bodies cooperate to determine the benefits of a person.
A third organization, the National Railroad Retirement Investment Trust, invests the excess funds and uses the profits to pay additional old-age pensions.
The railways' pension system offers two levels of payment: Tier – 1 benefits represents basic pension payments, while level 2 provides additional amounts to retirees based on length of service.
This part of the payment is based on loans combined in the rail and social security systems.
To calculate compensation, an employee's credible earnings are adjusted to account for fluctuations in lifetime earnings, and adjusted earnings are used to calculate the employee's indexed monthly earnings. The total payment for tier-1 corresponds to the first $ 926 of indexed monthly earnings, plus 32% of revenues of more than $ 926, plus 15% of earnings of more than $ 5,583.
This policy is accessible to retirees who have completed at least ten years of service for an employer governed by the pension law or at least 5-years after 1995.
Retirees with 30 years of service are entitled to a full pension for 60 years. Seniors with less than 30 years of service are entitled to a partial pension at the age of 62 and full benefits between 65 and 67, depending on the year of birth.
The Railroad Retirement Fund website illustrates the potential benefits of the two systems. Assuming that employees have a similar work history and receive maximum monthly benefits, a person receiving a railway pension would increase by $ 2,700 per month. In terms of social security, the person would receive $ 1,400 a month.
If you leave the railroad within five years of being employed, your benefit level will be fully transferred to the social security system. Employees with at least ten years (120 months) of credible rail service or at least five years (60 months) of trustworthy rail service after 1995, invest in the railway for retirement and are entitled to pensions and disabilities.
An old-age railway pension can only be paid when the employee stops working on the railway and requests to start receiving his monthly pension.
The first thing that can benefit from old age rail benefits must be 60 years, 30 years of qualified rail service, or 62 years. If you possess 30 years of rail service, you are entitled to a full pension of 60 years. Otherwise, the reductions in the old-age pension apply to pensions granted before the full retirement age, ranging from 65 years for those born before 1938 to 67 years for those born in 1960 or later. You can contact a financial advisor to help you make the best decision.
Elliot Kravitz, ATP