Question 62: I just found out that my father receives Railroad Retirement and not Social Security. I'm curious why he chose Railroad Retirement over Social Security. Where can I get more information about Railroad Retirement and how he can get Medicare?
Answer: You've come to the right place!
You father did not have a choice between Railroad Retirement and Social Security. Under Federal law, railroad workers are automatically covered by the Railroad Retirement System in any calendar month they work for any railroad in the United States. When they accumulate 120 months of Railroad service (10 years), they are vested in the Railroad Reirement System. (A proposal is pending that would reduce vesting to 60 months.)
The Railroad Retirement System is financed mainly by payroll taxes paid by railroads and rail workers. Unlike Social Security, the tax rates are not equal; railroads pay a much larger share. The trust fund also receives an annual transfer from Social Security equal to the savings to that program for not having to pay benefits for railroad service. And it receives some general revenue to fund the phase-out of certain dual benefits.
Like Social Security, the fund's assets are invested in United States Treasury securities and enjoy a good rate of return. (There is a proposal pending in Congress which would permit the investment of certain funds in the private sector markets.)
Generally, Railroad Retirement pays high benefits and at earlier ages than Social Security. That's because Railroad Retirement consists of two components, one equal to Social Security, and a second more like a private pension amount.
Like Social Security beneficiaries, people receiving Railroad Retirement are automatically covered by Medicare at 65, or earlier if disabled. And Railroad Retirement recipients can receive Part A Hospital Medicare benefits for certain services received in Canada.
To find out more about the program, read the other Q&As in the column and visit the Railroad Retirement Board's web site at http://www.rrb.gov