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How Spouse Benefits Are Affected By Worker's Post Retirement Work and Spouse's Public Pension
(Posted February 6, 2007)
Question 618: I am 58 years old with 34 years of railroad service. I am thinking of retiring early (before 60). I am now an officer of the company and can retire at 55, with reduced benefits. I have been offered another job as Chief Deputy with a law enforcement agency. How would this affect my wife's benefit when she reaches 60?
I have a second question. My wife will retire from a federal job. She will have a good retirement. Because of that, will she be able to draw full retirement from Railroad Retirement? Reading some of your other answers and questions, I think she will not be able to draw Tier 1. I am not sure I know what Tier 1 and Tier 2 are; can you explain?
Answer: Railroad Retirement benefits consist of two components, commonly called "Tiers". Tier 1 is similar to a Social Security benefit. It is based on your combined earnings from employers whose employees are covered by Railroad Retirement or Social Security. Tier 1 is reduced by the amount of any Social Security benefit you receive.
Tier 2 is similar to a private employer's pension. It is based only on railroad earnings. There is no reduction for Social Security.
Tier 1 benefits are subject to the same annual earnings limitation as Social Security. Tier 2 benefits are subject only to a special earnings reduction if the rail worker continues to work for the same non-railroad employer after becoming eligible for railroad retirement benefits. The Tier 2 earnings reduction is limited to 50% of the Tier 2 benefit.
A spouse usually receives 50% of the rail worker's Tier 1 plus 45% of the Tier 2. Tier 1 for a spouse is reduced by any Social Security that she receives and by 2/3 of the amount of any public pension paid by a government entity. If the rail worker's Tier 2 is reduced for earnings from the last non-railroad employer, then the spouse's Tier 2 benefit is based on the reduced Tier 2 amount.
One other thing you need to be concerned about if you decide to start new employment outside the rail industry before reaching 60: if there is enough of a "gap" between your rail employment and age 60, you run the risk of losing your "Current Connection." If you do, you will not receive a Supplemental Annuity, currently worth $43 a month but reduced by any private pension paid by your railroad. More importantly, though, your wife would receive a widow's benefit only from Social Security, not Railroad Retirement, meaning that none of the Tier 2 could be paid to her. You should ask the Railroad Retirement Board exactly when your non-railroad earnings would break your "Current Connection."
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