How Do You Calculate Your Railroad Retirement?

A railroad retirement annuity is calculated through formulas for two tiers of benefits and the vested dual payment, according to the U.S. Railroad Retirement Board. Spousal and survivor annuities are calculated separately.

For retirees first eligible for benefits in 2015, tier 1 is calculated in three parts added together, explains the U.S. Railroad Retirement Board. Part one is the first $826 of average indexed monthly earnings multiplied by 90 percent. The second part is 32 percent of the earnings over $826 up to $4,980. The third part is 15 percent of any earnings over $4,980. Tier 1 benefits are increased for every month a retiree works past full retirement age. Benefits are reduced for employees who retire before full retirement age.

Tier 2 is calculated based on years of railroad service, states the U.S. Railroad Retirement Board. A retiree’s years of service are multiplied by average monthly pay in the 60 months of highest earnings. This amount is reduced by 25 percent of any vested dual benefit amount due. The vested dual benefit is the Social Security benefit based on the retiree’s railroad service before 1975 and Social Security-covered income before 1975. The same reductions for early retirement applied in tier 1 are also included in tier 2 calculations.