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If I Leave Railroad Early, Are My 60/30 Benefits Less?
(Posted March 11, 2004)
Question 408: My question is somewhat similar to Q&A 377, but I would be working for myself for a much longer period before retirement. I am 52 years old with 34 years of railroad service. If I went to work for myself the next 8 years and maintained my current connection, but made less than I would have if I had stayed working for the railroad and then retired at age 60, how much of a reduction would I take by making less than I could have if I had stayed with the railroad? Do they use the highest 3 years in the last 10?
Answer: First, an important note of caution about "working for yourself." Railroad Retirement generally considers that incorporating your business is not "self employment" within the meaning of the Railroad Retirment Act. So be careful in how you structure your businees so you won't inadvertly break your "Current Connection."
The Tier 1 benefit is based on lifetime Railroad and Social Security-covered earnings. Only the lowest 5 years are dropped before an average monthly earnings is calculated.
The Tier 2 benefit is based on the highest 60 months of Railroad-covered earnings.
Without knowing your entire earnings history, it's hard to say how much of a price you'll pay by leaving the railroad up to 8 years before you're 60. The local Railroad Retirement Board office can probably give you a rough idea.
A lot depends on your earnings potential with the railroad, what you can actually earn as a self employed person, and how much the Tier 1 and Tier 2 maximum earings limits will increase in the next 8 years.
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