2025 Cost of Living Benefits Increase Boosts Railroad Retirement Benefits
As we move into 2025, retired railroad employees can anticipate a welcome increase in their Railroad Retirement Annuity thanks to cost-of-living adjustments (COLA). These adjustments are critical for helping retirees keep up with inflation and rising expenses. Let’s look at how the 2025 COLA increase will impact both the Tier I and Tier II portions of railroad retirement benefits.
Understanding Tier I and Tier II Railroad Retirement Benefits
Cost-of-living increases are calculated for both the Tier I and Tier II portions of a railroad retirement annuity to help beneficiaries keep pace with inflation. The Tier I portion, which functions similarly to social security benefits, will see an increase of 2.5 percent. This is based on CPI-W, and while not very much, it at least shows low inflation. This adjustment reflects the rise of the Consumer Price Index (CPI), ensuring that retirees maintain their purchasing power in the face of rising costs. The Tier II portion only gets 1/3 of COLA, which is 8%. This amount also has its method of calculation for adjustments, providing additional financial support to railroad retirees.
The Tier II portion of railway retirement benefits will see an increase of 0.8 percent, which represents 32.5 percent of the total rise in the Consumer Price Index (CPI). This adjustment is designed to help protect beneficiaries’ purchasing power amid inflation. However, it is essential to note that vested dual benefit payments and supplemental annuities provided by the Railroad Retirement Board (RRB) will not be adjusted to reflect this CPI change, meaning recipients of these payments will not see any increase in their benefits. This follows a 3.2 percent increase in the Tier I portion and a 1.0 percent increase in the Tier II portion of railroad retirement annuities from January 2024.
What COLA Means for Railroad Retirement Benefits
In January 2025, retirees from the railroad industry can expect some welcome news regarding their pensions. The average monthly annuity for regular railroad retirement employees will see an increase of $69, raising the total to $3,538. For couples where the employee and spouse receive combined annuities, the average monthly payment will rise by $97, bringing the total to $5,100.
Furthermore, eligible widows and widowers will also benefit from an increase, with their average monthly annuity going up by $42, resulting in a total of $1,966. This adjustment aims to provide additional financial support to those who have dedicated their careers to the railroad sector.
However, widows and widowers receiving annuities under the Railroad Retirement and Survivors’ Improvement Act of 2001 will not receive annual cost-of-living adjustments until their annuity amount surpasses what would have been paid under the previous law, taking into account all interim cost-of-living increases that would have otherwise been payable. Currently, nearly 29 percent of widows and widowers enrolled in the Railroad Retirement Board (RRB) are receiving payments under the 2001 law.
If an individual receives a railroad retirement or survivor annuity and also qualifies for Social Security or other government benefits, such as a public service pension, any cost-of-living increase in those additional benefits will lead to a corresponding reduction in the increase of their Tier I railroad benefit. This means that while they may see higher payments from the other benefits, it will not result in an overall increase to their Tier I railroad retirement benefit.
On the other hand, increases to Tier II benefits are not impacted by adjustments in other government benefits, allowing those amounts to grow independently. Furthermore, for widows or widowers receiving an annuity under the 2001 legislation, if they become eligible for a higher government benefit, their railroad retirement survivor annuity may be decreased as a result. This situation illustrates the complex interplay between different types of retirement benefits and how they can affect one another.
A Simple Method to Calculate Your Benefit Increase
Our National Legislative Director, Garey Faley, devised an approximator for everyone. The COLA increase notice says the average individual payment will increase by $69 per month, and the married couple will see an increase of around $97 monthly. Yet, since we all have varied amounts of benefits, Mr. Faley broke it down to $19.50 per $1000 per month if benefits are for a single person, while couples can expect $19 per $1000 per month. So, to break it down even further, if a couple draws $5,800 per month, they can simply multiply 5.8 by 19 to get a $110 increase.
2025 Annuity Notices to Reflect COLA Increase
The Railroad Retirement Board (RRB) will mail personalized letters to all annuitants in late December. These letters will provide a detailed breakdown of the annuity rates payable to each individual starting in January 2025. Additionally, the information contained in these letters can be used throughout the year to confirm eligibility for various income-based government programs, ensuring that annuitants have the necessary documentation for any financial assistance they may seek.
Get the Word Out: NARVRE Membership Benefits
The 2025 COLA increase is a vital adjustment for assisting railroad retirees to meet increasing costs of living so they can sustain their quality of life. With the 2025 COLA boost on the horizon, it’s the perfect time for NARVRE members to remind others of the benefits of membership. NARVRE informs retirees about crucial updates, benefit changes, and advocacy efforts to protect railroad retirement funds. By spreading the word about NARVRE, members can help grow the organization and strengthen its voice, ensuring continued support for railroad retirees nationwide.