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Answers are provided by Robert S. Kaufman
Financial Outlook for Railroad Retirement
(Posted December 1, 1997)
Question 6: I left the Railroad Industry with 14 years of service and I'll be eligible for Railroad Retirement when I retire. With all the concern about the financial health of Social Security in the future, what's the outlook for Railroad Retirement?
Answer: In theory, both Social Security and Railroad Retirement could experience a shortage of funds at some point in the distant future. This of course assumes that nothing will be done in the next 10-15 years to remedy the situation. The President, Congress and the public are well aware of the possibility, and it's just not conceivable that timely action would not be taken to either increase taxes, reduce future benefits, or some combination of both. In fact, President Clinton and Congressional leaders recently discussed setting up a group of experts to review the entire situation and make appropriate recommendations for Congress to consider.
Funding problems are not new to Social Security and Railroad Retirement. Both had serious problems in the early 1980's. The problems grew so severe in 1983, that payroll taxes collected during a month were needed to pay benefits at the end of the month. In other words, both programs were virtually broke. But President Reagan and Congress acted in time and both programs were put on solid ground.
By the way, Social Security provides the majority of funds used to pay Railroad Retirement. This is done through an annual transfer between the Trust Funds, in which Railroad Retirement pays Social Security for the payroll taxes Social Security would receive from railroads and rail workers if there were not a separate Railroad Retirement Program. At the same time, Social Security pays Railroad Retirement for the Social Security benefits it would have to pay to rail workers if there was not a seperate system. The net transfer has gone in favor of Railroad Retirement for many years, for good reason. There are currently less than 260,000 rail workers paying taxes and more than 700,000 people drawing Railraod Retirement. Bottom line is that Railroad Retirement would be impacted if Social Security has financial problems in the future.
As a practical matter, I don't think there is any chance that the United States Government would let either program fail.
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