Railroad Retirement Survivor Benefits – Will my family be taken care of if I pass away?
This is a question that plagues every person who has family that depends on them. There is no replacing those relationships or the memories, but at least you can ensure that your family is not burdened with financial struggles. Survivorship planning can include a plan to replace future lost income, take care of existing debts and possibly provide a legacy to your heirs. For those still working, a big part of funding those goals will come from your Employee Benefits. How does this work for Railroaders? Is there anything that a Railroad Retirement beneficiary will receive that is different than the average worker?
Being “insured”
Before we discuss what benefits are available for your family, it is important to know HOW you qualify for those benefits. You need to be “insured” under the Railroad Retirement Act. You are considered “insured” if:
You have at least 120 months (10 years) of railroad service, OR
You have 60 months (5 years) after 1995 AND a current connection with the railroad industry as of the month the retirement annuity begins or the month of death, whichever occurs first.
There are very specific rules that determine how you can meet the current connection requirement. Generally, if you have worked in the railroad industry for at least 12 of the previous 30 months, you are considered to have a connection. If there were gaps in railroad employment, self-employment after the last 30 month period, etc. you will want to review the Railroad Retirement standards for meeting the current connection requirement. The good news is, once you qualify for the connection at the time your retirement annuity begins, you will NEVER lose that current connection requirement.
What happens if you die without having an “insured” status? Jurisdiction of survivor benefits falls to the Social Security Administration who will consider both your railroad retirement and social security credits to determine the benefit your family will receive.
Widow(er) Eligibility
Not only do you have to be insured, but your widow(er) has to be eligible to receive benefits.
Generally, you have to have been married 9 months prior to death for your spouse to receive their benefits. However, they are not going to be able to start benefits until they are age 60 unless they are caring for your child who is under age 18 or caring for your disabled child who became disabled before age 22. Your spouse is also eligible to receive survivor benefits between ages 50-59 if they have a total disability.
The benefits are the same for an ex-spouse - as long as they were married to you for at least 10 years. Benefits are also the same for your remarried widow(er).
What the ex-spouse and remarried widow(er) do NOT qualify for are your Tier 2 Benefits.
Benefits
We’re discussed Tier 1 and Tier 2 Benefits in previous blog posts. You’ll recall that Tier 1 Benefits are calculated using your combined credits in both the Railroad Retirement and Social Security Systems and are based off your highest 35 years of income. The Tier 2 benefit is an additional benefit for Railroaders that resembles a defined benefit pension based on tenure.
Tier 1 Survivor Benefits are treated the same as Social Security. Generally, your spouse is going to get amount of survivor benefits that would have been payable under social security. They are going to get the higher of your Tier 1 benefits or their Tier 1 Spousal retirement annuity/Social Security benefit at your death.
Their Tier 2 benefit will be equal to the Tier 2 benefit you would have received, minus any applicable age reductions.
While it is true that your spouse can access their survivor benefits at age 60, it will be at a reduced amount based on the number of months prior to their Full Retirement Age. Once they get to full retirement age, they will receive their full benefits. Like Social Security, the eligibility age for a full widow(er)’s annuity is gradually rising to age 67 for those born in 1962 or later.
Family Benefits
What about benefits to my children? What if I have an aging parent that was my dependent, are they included in receiving benefits?
As long as your children are under the age of 18 and unmarried or age 19 and unmarried (if they are Full time students in high school), they will receive benefits. If that unmarried child over 18 becomes totally disabled before the age of 22, they will also receive survivor benefits. In 2020, children received about $1550/month on average.
Monthly survivor benefits are also payable to a parent at age 60 if they were dependent on the employee for at least half of their support. If that same employee was also survived by a spouse, divorced spouse or child who could qualify for the annuity, the parent’s annuity will be limited to what Social Security would pay.
Also like Social Security, your family will receive a $255 lump sum benefit. This benefit amount is higher if you completed 10 years of creditable railroad service before 1975.
The railroad retirement lump-sum benefit is generally payable only if survivor annuities are not immediately due upon an employee’s death. The social security lump-sum benefit may be payable regardless of whether monthly benefits are also due.
These benefits will be just a piece in the overall survivorship strategy of your Financial Plan. Understanding these Railroad Survivor Benefits will be important as you determine how much your family needs, to make sure they will be well taken care of after you die. Contact our team of Certified Financial Planner advisors at PARAGON to bring a plan together that fulfills your wishes of taking care of your family if the unexpected were to happen.
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