I am turning 66 in January. I worked for a railroad for 20 years, and now 20 years for another company outside of railroad. I plan to continue working to 70. In contacting RRT, they recommended I begin taking SS at 66 in lieu of delaying until age 70, suggesting I would likely never recover the difference, even with the potential of added taxes to a higher bracket. Could you provide some clarity to the best decision?

Hi,

It sounds like you are eligible for both Social Security (SS) and Railroad Retirement (RR). I can't tell from your question whether or not you have already filed for RR, but when you do, you will be eligible for a 2-tiered benefit. Tier 1 is roughly an equivalent of SS. Tier 2 is based on your railroad work only, and is similar to a company pension in the private sector.

If and when you apply for Social Security, your Social Security benefit amount will be calculated based solely on your years of work under SS. The Railroad Board will compare your SS benefit amount to your tier 1 RR benefit amount, and pay you the higher of the two. You will also receive your tier 2 RR benefit in addition to the higher of the SS and tier 1 RR.

I don't know how to interpret the advice you were given by Railroad. If they mean that your SS benefit amount is higher than your tier 1 RR benefit, then the only question is when it is best for you to apply for the SS. If you wait until age 70 to start your SS benefit, it will be 32% higher than if you start it at age 66. That's true even if you are already receiving RR benefits. Thus, it could be quite advantageous for you to wait until age 70 to file for SS.

On the other hand, if your tier 1 RR benefit amount is higher than your SS benefit amount even if you wait until age 70, then you would not gain anything by ever filing for Social Security. Some states tax SS benefits but not RR benefits, so filing for SS could amount to nothing more than trading non-taxable income for taxable income, depending on where you're living.

Unless you already know the amounts, I would advise you to contact both Social Security and Railroad in order to determine your SS benefit amounts at 66 & 70, and your tier 1 RR amount. If the SS is higher, I think it will likely be advantageous for you to wait until age 70 to file for your SS.

Best, Jerry