- How to Retire Early on Social Security
- What if I Don't Have Enough Credits for Social Security Benefits When I Retire?
- When Does Income Not Make a Difference on Social Security Benefits?
- How Many People Receive Social Security Benefits?
- The Social Security Earnings Limits for Early Retirement
- How Does Civil Service Retirement Affect Social Security Benefits?
A strong majority of workers in the United States have access to the Social Security system, which requires contributions from wages and pays lifetime retirement benefits starting at age 62. A lesser-known parallel system of retirement pensions has existed since the 1930s that benefits railroad workers. The two systems are closely related, but some differences persist and, for qualified railroaders, give rise to a more comprehensive benefit system.
The federal railroad retirement system began in the 1930s, as did Social Security. When the Depression threw many railroads out of business, rail workers by the thousands lost their private pensions and their sole means of support. Unemployment benefits were unavailable to workers who did not have an established place of work in any particular state. Because workers could only fund Social Security benefits with employment starting in 1937, the nation faced a crisis among retired railroad workers. Congress created the federal Railroad Retirement Board to pay pensions, disability and unemployment benefits to workers in this important sector. The federal benefits replaced the private pension system run by the surviving railroad companies.
The Railroad Retirement system has survived into the 21st century, with the RRB paying retirement and disability benefits to covered workers using the same basic formula that calculates Social Security benefits. Workers covered by the RRB system pay into two basic levels, Tier I and Tier II. The former levies a payroll tax of 6.2 percent of wages; for the Tier II program employees pay an additional tax of 4.4 percent of wages as of 2013. Tier II contributions fund an additional benefit designed to be comparable to a private company pension. Employers also contribute, at the rate of 6.2 percent for Tier I program and 12.6 percent for Tier II.
While Social Security retirement beneficiaries need 40 credits, earned by paying payroll taxes on a specified amount of wages, railroad workers qualify for their RRB benefits by working for a specified period of time (120 months as of 2013, or 60 months of work done after 1995). Railroad workers with less than 60 months of employment when they retire transfer into the regular Social Security system. Workers with at least 30 years of service with the railroads are entitled to a full retirement benefit as early as age 60.
Reduced Benefits and Full Retirement Age
An important difference between a Social Security benefit and an RRB benefit is that the latter is not available if you're still working for the railroad -- you must stop employment to be eligible. If you have less than 30 years of work, then you may take early and reduced RRB benefits at age 62, as with regular Social Security. Full retirement age, at which you can draw a full benefit, is the same with both the RRB and Social Security, ranges from 65 to 67, depending on the year of your birth.
- NA/AbleStock.com/Getty Images