How much is railroad retirement?

If you are a railroad employee, you may be eligible to receive railroad retirement benefits. The Railroad Retirement Program is a federal program that started in the 1930s, and it pays retirement and disability benefits to railroad employees, spouses, and survivors of eligible workers.

As of 2022, the average regular railroad retirement monthly annuity is $3,104, while the combined benefits for an employee and his/her spouse is $4,501 per month. If you are a widower of an eligible railroad worker, you will receive $1,534 in railroad retirement annuity.

How much is railroad retirement?

The amount paid as railroad retirement depends on the years of service in the railroad industry. The average annuity paid by the Railroad Retirement Board to career railroad employees with at least 30 years of service was $3,735 per month, while the average pay for railroad employees with 5 to 29 years of service was $2,985 in the 2020 fiscal year.

In January 2022, the Railroad Retirement Board increased railroad retirement annuities. The average annuity for a railroad employee increased to $3,104 a month, while the combined benefits for an employee and spouse increased to $4,501. The annuity for eligible widows and widowers increased to $1,534.

How Railroad Retirement Program Works

Railroad workers contribute to the Railroad Retirement Plan, and the money paid is used to fund the retirement program. The Railroad Retirement Board is responsible for managing the retirement program. Railroad workers get one credit for each month they work for a railroad employer. The benefits are then paid out based on the number of months of service as railroad workers and the credits they earned.

Generally, you will only collect railroad retirement when you end your railroad employment or retire. Also, you must attain the age threshold for railroad retirement benefits. You can collect these benefits as early as age 60, as long as you have at least 30 years of qualifying railroad service. Otherwise, you must wait until you are 62 to start taking railroad retirement benefits.

Railroad Retirement Program Tiers

Benefits from the Railroad Retirement Program fall into the following two tiers:

Tier 1

You can access Tier 1 benefits if you have accumulated more than 10 years of service in the railroad industry. If you started working for a railroad company in 1995, you will need at least 5 years of service. You can then collect retirement benefits at age 62 but with an age reduction.

If you have more than 30 years of qualifying service in the railroad industry, you can start collecting retirement benefits at age 60 with no age reductions. Therefore, if you have worked 30 years of service, you can retire at age 60 and take the full benefits.

Tier I pays out spousal benefits, disability benefits, occupational benefits, widow's survivor benefits, and children survivor benefits.

Tier 2

Tier 2 benefits are similar to a private pension, and it is based on the length of service in the railroad system. You will receive tier 2 benefits alongside any pension, 401(k) distributions, or other retirement benefits you are entitled to receive from your employer.

The benefits you receive are determined by taking the average income for the five highest-earning years. Then, multiply this amount by 7/10 of 0.1% (0.007) and the number of years in the railroad system.

For example, assume that you will retire in December 2022, with the five highest-earning years being the previous 5 years. If your average monthly income for the last 5 years is $7,000 per month, and you will have worked 30 years by end of 2022, your tier 2 benefits will be as follows:

=$7,000 x 0.007 x 30 years

=$1,470

Therefore, based on your previous earnings and length of service, your tier 2 benefits will be $1,470 per month.

While you can receive your railroad retirement benefits while still working, you can’t be employed by an entity covered by the Railroad Retirement Act. You will have to find work outside the railroad industry.

Eligibility for Railroad retirement

Here are the eligibility requirements for each benefit:

Railroad retirement benefits

The railroad retirement benefits are based on the years of service in an eligible employer. If you have 30 or more years of service in the railroad industry, you can retire at 60 and get the full benefit. However, if you have more than 5 years but less than 29 years of service, you will receive reduced benefits if you collect the benefits before the full retirement age.

Spousal benefits

If a railroad employee is age 60 and has 30 years of qualifying service in the railroad industry, then his/her spouse can opt to receive a spousal annuity (PDF) when they turn 60. However, if the railroad employee has less than 30 years of service and is age 62 or older, the spouse can elect to receive an annuity when they turn 62.

Survivor benefits

If you are a widow, widower, child below 18 (or who became disabled before 22), or a parent, you can receive survivor benefits if the railroad employee worked at least 10 years for a railroad employer, or at least 5 years if they started working after 1995.

Disability benefits

You must have at least 10 years of service in the railroad industry or at least 5 years of service if you started working after 1995 to be eligible for railroad disability benefits. You must provide evidence proving that you are unable to work before you can collect a disability annuity. You will be required to provide medical evidence showing that the condition will last for more than one year, or is expected to result in death.