Ask Money

Social Security and the railroads

Chris Farrell May 21, 2010

Question: I have about $135,000 that I paid into social security, and also have been with the railroad for a long time and will retire soon. Can I get SS and railroad benefits both since I paid into both? Or was all my hard work, that I put into SS be given to a stranger? Steve, Beaverton, OR

Answer: It does look like there will an adjustment made to your retirement benefit. But you’ll get what you’re owed within the rules of the two basic retirement systems.

Railroad workers were covered by the Railroad Retirement Board before Social Security was founded. Railroad workers still come under the railroad pension system but a portion of each railroad pension is designated as “equivalent” to Social Security. Railroad workers also participate in Medicare. You aren’t being ripped off.

By the way, Social Security is an essential part of retirement security. It’s basically a progressive social insurance scheme instead of a traditional pension. The Social Security Administration overseas a number of benefits, including to the disabled and surviving spouses and their children. And, of course, there is the monthly payments to retired older workers.

Now, since 1975 the amount you would get from your railroad pension is reduced if you’re eligible for both a railroad retirement annuity and Social Security income. The reason is that the so-called “Tier 1” or baseline railroad retirement annuity is similar to Social Security. “Tier I benefits are, therefore, reduced by the amount of any actual social security benefit paid on the basis of nonrailroad employment, in order to prevent a duplication of benefits based on the same earnings,” according to the United States Railroad Retirement Board.

However, you have other retirement benefits that come with having worked on the railroad. For instance, the “Tier II” portion of the railroad pension you will get is not reduced by Social Security.

I can only give you a brief overview. I would strongly urge you to contact the Railroad Retirement Board and have a representative walk you throiugh your situation since there have been changes in the law over the years. You can learn more about railroad retirement benefits and Social Security here.

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