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Lane
Lane, JD,CFP, MBA, CRPS
Category: Social Security
Satisfied Customers: 12667
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial, Social Security & Tax advice since 1986
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I am 2 months shy of 5 years working railroad (vested

Customer Question

I am 2 months shy of 5 years working for the railroad (vested for RRRB benefits at 5 years).
I do NOT plan on staying with the railroad much longer and plan to go back into private industry (or possible self-employment as I am a general contractor). I am 53 and have paid into social security many years, so I do qualify for ss benefits alone. And I plan to work until at least 67.
Should I stay to meet the RR 5-year vesting? It seems like it could only help (increase monthly payments slightly) - but I have heard:
1) It could hurt me if my income goers up substantially after I leave the railroad?
2) It could hurt my wife, who makes a very high income?
Submitted: 1 year ago.
Category: Social Security
Expert:  Lane replied 1 year ago.

Hi,

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In your case it may actually make more sense to leave at the point where you are just under 5 years.

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If (for a person whose work is all after 1995) you have less than 5 years under RRB, your years in the system will simply be transferred into the Social Security system as if those years were in the Social Social Security system (and will contribute to your AIME (Average Indexed Monthly Earnings) under that system - SImply becomes part of your SSA work record.

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If you vest, you'll have a separate RRB pension.

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HOWEVER, the Tier 1 portion of your Railroad Retirement Annuity will be reduced by the amount of your Social Security benefit, so you may not receive more in total benefits, and in fact, in YOUR scenario where your have a significant benefit from Social Security, the social security will very possibly wipe out a small 5 year RRB pension.

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So, again, I'd have to know more about your specific work record, and calculating the Indexing (inflation adjusting) of average income that goes into calculating AIME, and knowing whether or not those years in RRB would be a part of the HIGHEST 35 years earnings (which could greatly help youir SSA benefit by increasing your AIME), if you did stop working under RRB bwfore 5 years is up, is beyond the scope here.

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But one thing is certain ... if you go past 5 years there IS an offset, and with the number of years you'll have in the Socual Security system by the time you reach FRA at 67, the small RRB pension (received for staying over 5 years) will likely be offset, (potentially wiped out in your case).

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TO complicate matters furrther, the tier II benefit is NOT reduced by an offset ... BUT again, it's possible that your earnings by stopping before 5 years and including those in your Social Security work record for SSA purposes could make up for the fact that would be no Tier I and SSA may be a higher amount.

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If you'd like a detailed analysis (even that will somewhat projection, as you do not yet know what the earnings between now and age 67 unde SSA would look ike) I can make an additional services offer to do that very complicated work.

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Let me know

Lane

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I hold a law degree, (Juris Doctorate), with concentration in Tax Law, Estate law & Corporate law, an MBA, with specialization in financial accounting & tax, a BBA, and CFP & CRPS designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice, since 1986.