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Did You Get a RESCUE Award in Railroad Retirement? Thumbnail

Did You Get a RESCUE Award in Railroad Retirement?

Tier 1 Tier 2 Video Annuity Retirement


Did You Receive the Correct Amount When You Started Your Railroad Retirement?

Hi everyone, and welcome back to another edition of the Highball Advisors Railroad Retirement Whiteboard. I'm John McNamara from Highball Advisors. Today, we’re diving into a little-known but important topic: the Rescue Award issued by the Railroad Retirement Board (RRB) when they underpay an annuitant.

What Is the Rescue Award?

Each year, the RRB issues around 11,000 Rescue Awards to retirees whose annuities were initially underpaid. This typically happens because final year earnings weren’t reported in time when the annuity was first calculated. The Rescue Award helps correct that.

How the Railroad Retirement Annuity Is Calculated

To understand this better, let’s briefly review how your annuity is calculated:

  • Tier I is based on your highest 35 years of earnings, calculated by the Social Security Administration.
  • Tier II is based on your highest 60 earning months, multiplied by your years of service and then by 0.007, and is calculated by the Railroad Retirement Board.

Why the Rescue Award Happens

Let’s say you retire in 2024 and start receiving your annuity in early 2025. The earnings from your final months of work in 2024 may not have been fully reported to the RRB yet. That means your annuity may be lower than it should be when it first starts.

The RRB later receives updated earnings data through their Electronic Data Management (EDM) system and recalculates your benefit—this is where the "RESCUE" part comes in: "Recalculate for Service and Compensation Updated."

Tier I vs. Tier II Adjustments

  • Tier I: Adjustments won’t happen right away. If you retire before age 62, the Social Security Administration won’t recalculate your Tier I benefit until you actually turn 62. Fortunately, because Tier I is based on your top 35 years, the impact of one year of missing data is usually small.
  • Tier II: This is where it gets more significant. Since it’s based on your top 60 months, your final six months of work could represent up to 10% of the Tier II formula. So if they’re missing, you could see a meaningful difference. Luckily, Tier II is adjusted more quickly—once the earnings are updated, the RRB issues the Rescue Award, back-pays you for the shortfall, and adjusts your monthly benefit going forward.

Final Thoughts

I’ve had a few clients ask about this recently, so I wanted to explain it for everyone’s benefit. If you recently retired and feel like something’s off in your annuity, this might be the reason.

I hope you found this video helpful. Feel free to explore my Boarding for Railroad Retirement process and see how your retirement benefits are shaping up. Please like, share, and subscribe to the channel—I really appreciate the support.

Until next time, stay safe, stay on track, and take care!

So long, everybody.

 

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Disclaimer: This article is provided for general information and illustration purposes only. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, or investment advisory services. Highball Advisors encourages you to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. Reproduction of this material is prohibited without written permission from Highball Advisors, and all rights are reserved from Highball Advisors, and all rights are reserved.