As the name implies, federal railroad retirement benefits (RRB) are available to people who have worked in the industry. These benefits may be paid to a spouse or survivor of an eligible employee under the provisions of the Railroad Retirement Act.
Eligibility for Railroad Retirement Benefits
To be eligible to receive railroad retirement benefits (RRB), you will need to demonstrate to the U.S. Railroad Retirement Board that you have worked for one of the employers covered under the Railroad Retirement Act. Its regulations define an employer as a carrier who performs a service that is connected with transporting passengers or goods by rail.
You also must have worked for the eligible employer for at least five years (60 months). Employees who worked before 1995 must have completed at least 10 years (120 months) of service. Employees who work only one day a month are given credit for the entire month.
Read More: How to Apply for Retirement
When You Can Receive RRB
Once you meet the service requirements, you may be wondering when you can start receiving your retirement benefits.
An employee with 30 years of service can retire the first full month after their 60th birthday. They will receive the full amount of their retirement benefits, also called age and service annuities.
Someone with five to 29 years of service can still retire at age 60; however, the amount of their age and service annuities will be reduced.
An employee who delays collecting their retirement benefits until after full retirement age (either age 65 or 67, depending on the employee’s birth year) will collect a higher amount in railroad retirement benefits.
Do you Pay State Income Taxes on RRB?
The answer to the question, “Do you pay state taxes on railroad retirement benefits?” depends on where you live. As of 2020, individual states and the District of Columbia were treating private pension income in the following ways for tax purposes. RRB is not considered to be a public service pension. It is treated like a private pension plan for state income tax purposes.
States that Do Not Tax Retirement Income
- South Dakota
If you live in New Hampshire or Tennessee, you only pay tax on dividends and interest income.
Read More: Public Pensions vs. Private Pensions
States that Tax Some Retirement Income
If you live in one of these states, you may be able to claim an exemption limiting the amount of retirement income the government considers subject to tax.
- New Jersey
- New Mexico
- New York
- Rhode Island
- South Carolina
- West Virginia
Also, the states of Ohio, Oregon and Utah issue tax credits for pension or retirement income.
States Where Retirement or Pension Income is Taxable
In the following states and the District of Columbia, either a percentage or the full amount of private pension income is taxable.
- District of Columbia
- North Carolina
- North Dakota
For more information about RRB, go to the U.S. Railroad Retirement Board website. It provides general information, along with downloadable/printable forms for age and service annuities. The site also has a section for secure communications with the board if you have questions or concerns about your benefits.
Jodee Redmond is a freelance writer, blogger and editor who has been working full-time for over 15 years. She is a graduate of Centennial College and has worked as a tax consultant and a legal assistant. Her previous experience and boundless curiosity is a distinct advantage when writing about such varied topics as income tax, insurance, commercial property, business, construction, addiction, freelance writing and more.