I would guess that RRB was established and took over the handful of private pension plans that existed on a few Class 1's at the time in part to cover all railroaders and in part because of the not uncommon practice at the time for railroaders to move from one road to another to follow the work.
There are several reasons RR began...remember first, there was no Social Security and, in reality, virtually no pension systems as we know them if any at all. Railroad workers often retired early because of injuries but many worked until death. Unions and management realized there had to be a program to allow older workers ease out and younger guys learn and move up all the while maintaining an organized operating unit that would work with and without the most senior and most junior of skilled employees. It also allowed for survivors of employees to not become indigent.. It was progressive and worked for the safety and benefit of both labor and railroad. Railroad employees in the late 19th and early 20th Centuries were the largest employee group, and thus the strongest assembled group, and often the best paid employee group.
Also note that any and all other pension programans, 401Ks, personal retirement accounts, employee pension plans, etc., are not tied to RR or SS in anyway, are seperate agreements between employers and their chosen employees (could be all or just managers or...whatever).
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Murphy Siding Why can't the railroad industry change the retirement program over to 401k type program with employer contributions like other industries? Is there some advantage to having Uncle Sam involved? It appears there may be some disadvantges to having the federal government involved.
Why can't the railroad industry change the retirement program over to 401k type program with employer contributions like other industries? Is there some advantage to having Uncle Sam involved? It appears there may be some disadvantges to having the federal government involved.
Risk, or rather the lack of risk. It would be very difficult for a person in their seventies to go back into the workforce when their 401k is either exhausted or the private company backing it goes under, and so a plan that provides all retirees with a guaranteed, defined benefits is key. The US government,on the other hand, is the longest continuously existing government (that is to say, without a change in the basic law of the land, in our case, the US Constitution). The US government is very unlikely to go bankrupt in a Madoff-style scheme, to say the least.
DwightBranch Murphy Siding: Why can't the railroad industry change the retirement program over to 401k type program with employer contributions like other industries? Is there some advantage to having Uncle Sam involved? It appears there may be some disadvantges to having the federal government involved. Risk, or rather the lack of risk. It would be very difficult for a person in their seventies to go back into the workforce when their 401k is either exhausted or the private company backing it goes under, and so a plan that provides all retirees with a guaranteed, defined benefits is key. The US government,on the other hand, is the longest continuously existing government (that is to say, without a change in the basic law of the land, in our case, the US Constitution). The US government is very unlikely to go bankrupt in a Madoff-style scheme, to say the least.
Murphy Siding: Why can't the railroad industry change the retirement program over to 401k type program with employer contributions like other industries? Is there some advantage to having Uncle Sam involved? It appears there may be some disadvantges to having the federal government involved.
Numbers. There is strength in numbers. One person's account does not yield as much as ten thousand people's account. Costs as much to make one investment as it does to make 10,000. Plus the bigger the size of the investment, the bigger the yield. And instead of all the invstment going into one buy it is divided enough so that if one is low it won't bring the others down; and if one is high,it might help lift others. It is like a mutual fund, a giant mutual fund.
Considering the amount that employees and employers contribute to RRR as payments, is this money invested in a way to provide a return over time? So, when a person retires, will he or she receive a benefit that returns a profit on the investment?
This is what is missing from social security. Is it also missing from RRR?
When a railroader retires today at age 60, after working for a railroad say since the age of 18, what is the amount of money that the person could collect say if he lived another 30 years? What is the amount he paid in between age 18 and age 60?
Bucyrus Considering the amount that employees and employers contribute to RRR as payments, is this money invested in a way to provide a return over time? So, when a person retires, will he or she receive a benefit that returns a profit on the investment? This is what is missing from social security. Is it also missing from RRR?
When you introduce the possibility of a profit, you also introduce the possibility of a loss, up to the total amount invested (see Madoff, Bernie) and that is someone incapable of working anymore cannot bear. One's retirement portfolio needn't be a money-making scheme. I personally do not want a society where our retirement system is organized like a Las Vegas casino or a lottery, and I don't think most retirees do either.
Well, I don’t think it has to be a choice between no investment and a Las Vegas casino. The people who oppose privatizing social security always bolster their argument by characterizing investment of funds as a risky scheme. But isn’t there a middle ground where the funds could be invested to some reasonable advantage without unacceptable risk? What about 401k plans? They are invested with risk and many people find this acceptable. Isn’t responsible investing a fundamental component of saving money?
Social security is in trouble. Why should it be if it were properly managed?
The financial aspects of various retirement plans is a very complex subject. It usually takes a small library of relevant books to understand all of the dynamics.
Retirement in the United States is usually funded from three principle sources, sometimes referred to as a three legged stool. For most people retirement monies come from Social Security (Railroad Retirement), legacy retirement or employer sponsored 401(k) and 401(m) plans, and personal investments and savings.
Social Security is not a retirement account. It is a tax transfer scheme. I don't know about Railroad Retirement. Workers pay payroll taxes: they pay all of it contrary to popular belief, and the monies are transferred to beneficiaries, i.e. retirees, survivors, and disabled persons. Until 1985 Social Security was a pay as you go system, which meant that the amount of the payroll tax was determined actuarially to cover the expected number of current beneficiaries. However, in 1984 or 1985, I don't remember the exact date, as a result of a recommendation by the Greenspan Commission, the combined payroll taxes were increased to build a surplus in the Social Security Trust Fund in preparation for the bubble in benefits anticipated because of the retirement of the baby boomers beginning in 2010.Instead of investing the monies, the government used the surplus to fund general operations. The Social Security Trust Fund received non-marketable notes from the U.S. Treasury in exchange for the surplus funds. As benefits exceed revenues, which they did beginning in 2010, the Social Security Trust Fund must redeem some of the notes to pay for the benefits. The Treasury does not have any surplus funds, to it has to borrow the money in the open funds markets to redeem the notes.
Monies paid into a legacy pension fund or a 401(k)(m) fund usually are invested in a variety of securities. The pension fund and the 401 funds are managed by an independent fund administrator. Most of these funds earn substantial returns. This is true not only for railroads and businesses; it is also true for state and local government employees, teachers, university professors, etc. In fact, the Texas Teachers Pension Fund is one of the best managed funds in the United States; in fact, it is one of the best managed funds in the world. In the case of federal employees, including retired military personnel, their retirement benefits are paid out of operating funds.
Personal savings are invested according to the risk profile of the saver. The safest bets are CDs, which are guaranteed with restrictions by the FDIC, Treasury Notes, etc. Risker investments include bonds, stocks, etc. The key to personal savings or investing of any kind is diversity, which is necessary to spread the risk.
There are risks associated with any form of investment, including so-called government retirement programs. A business can go bankrupt, in which case its pension plan, assuming that it was qualified, will be taken over by the Pension Benefit Guaranty Corporation. If this happens the beneficiaries may receive a reduced benefit, but only a small percentage of retirees find themselves in this position.
If a person invests in overly risky securities, i.e. junk bonds, speculative stocks, etc. he or she can lose some or all of their stake. On the other hand, if they are too conservative, i.e. over concentration in CDs, Treasury Notes, etc., they may not have enough money for retirement, irrespective of whether they worked for a railroad or the government or whoever. Note my tying this discussion back to the railroad industry.
There are risks associated with Social Security. The government is not contractually obligated to pay Social Security benefits. It could pull the plug on them at any time, as per a Supreme Court ruling regarding the payment of benefits to a foreign national who worked in the United States for more than 25 years but retired to a country that the U.S. deemed a terrorist nation. In addition, Social Security has changed the guidelines for benefits on numerous occasions, i.e. age required to qualify for full benefits, increase in the payroll taxes, taxability of benefits, etc. Each of these changes in effect has reduced the value of the program for some or all of the participants.
An overriding risk for all of the aforementioned retirement schemes is under funding. This is true for business, state and local governments, Social Security, etc. Many retirement plans are in serious trouble, including Social Security, because the policy makers over promised on benefits and, further, because retirees are living much long than had been anticipated.
Of course a retirement fund is undefined here. So, for the sake of arguement, lets define. 1) personal retirement fund is one in which an individual invests in hopes of having saved his money and earned interest so that it is more than just his investment in the long term. 2) a retirment fund plan like SS or RR which individuals pool funds and the orginization itself will invest the accrued monies so that at least there is no loss, but should, overall, reap interests to cover cost of administering and return same to those who subscribed to it. SO, SS and RR is of the latter and with a portfolio that should keep invested funds at least intact...and with more individuals putting into their accounts, the more there is to invest and return. As long as more people put in than take out, it should work. But an individual cannot spread his own money wide enough, even with Mutual Funds, to save and get a return as is done with SS or RR.
henry6 Of course a retirement fund is undefined here. So, for the sake of arguement, lets define. 1) personal retirement fund is one in which an individual invests in hopes of having saved his money and earned interest so that it is more than just his investment in the long term. 2) a retirment fund plan like SS or RR which individuals pool funds and the orginization itself will invest the accrued monies so that at least there is no loss, but should, overall, reap interests to cover cost of administering and return same to those who subscribed to it. SO, SS and RR is of the latter and with a portfolio that should keep invested funds at least intact...and with more individuals putting into their accounts, the more there is to invest and return. As long as more people put in than take out, it should work. But an individual cannot spread his own money wide enough, even with Mutual Funds, to save and get a return as is done with SS or RR.
Social Security Funds are not invested. The surplus pay taxes have been borrowed by the federal government for general purposes. In exchange for the use of the funds, Social Security has been given non-marketable Treasury Notes. Theoretically, they earn six per cent per year. In fact, they don't earning anything. The interest is accrued by the Treasury. When it redeems the notes, as it was forced to do in 2010, and will be forced to do so in ever increasing amounts rolling forward, it had to borrow the principal plus the accrued interest.
The notion of the Treasury paying interest on the monies that it has taken from the Social Security Trust Fund is akin to a person paying his or her mortgage with a credit card. The interest and principal on the mortgage are reduced, but the credit card debt increases. At the end of the day it is a losing game game, i.e. the general tax burden has increased.
Most Americans, unfortunately, don't understand how Social Security works. Many of them believe that it is a retirement account akin to the plan of their employer, etc. Nothing could be further from the truth. Social Security is a tax transfer scheme, as I noted in my previous post.
The Railroad Retirement Pension is not Social Security. That was supposed to be the topic of this thread, yet it seems to have degenerated into another political back and forth, with more smoke then light. Why not discuss the thread topic, and you don't really know anything about this very specialized topic (sam1, others), let it go?
C&NW, CA&E, MILW, CGW and IC fan
Define tax transfer scheme, please. Tax would indicated money taken but not returned. SS money is taken and theoretically, and normally, returned to those who put their money in as an individual and equalled by an employers contribution. If it is a real transfer scheme, as suggested, then no one would get any money back at any time.
And, yes, if the money put in is taken out for purposes other than supporting and operating the fund, it should be stopped.
I don't believe, however, that RRR money is confiscated by the Federal government the same, but is compensated for the adminsitering of the contributions being made by railroad employees and equally by their employers.
schlimm The Railroad Retirement Pension is not Social Security. That was supposed to be the topic of this thread, yet it seems to have degenerated into another political back and forth, with more smoke then light. Why not discuss the thread topic, and you don't really know anything about this very specialized topic (sam1, others), let it go?
The question posed was if RR Retirement was gone...., which implies amongst other things what could take its place. One option is Social Security. In fact, over the years, there have been recommendations to fold RR Retirement into Social Security.
My previous posts discussed briefly several options if RR Retirement was gone, including SS, private pension plans, and personal investments. I made it clear that I don't know the Railroad Retirement scheme or plan, except I am reasonably confident that it uses the same actuarial techniques employed by Social Security, private pension plans, insurance companies, etc.
If the assertion is that I don't understand Social Security, 401(k) and 401(m) investment schemes or personal investing, no one posting to these forums has a clue, other than what I say, as to what I know. As a matter of fact, I read the Social Security and Medicare Trustee's report every year. Not just the executive summary! The complete report with all the actuarial tables! And I understand what I am reading. Also, as a retired accountant, I understand how the government accounts for transactions and how it differs from GAAP.
sam1: I clearly said: "you [and others] don't really know anything about this very specialized topic " (RRB), nothing about whether or not you know anything about SS or government accounting. This was based on your statement (perhaps you forgot?), "I don't know about Railroad Retirement."
schlimm sam1: I clearly said: "you [and others] don't really know anything about this very specialized topic " (RRB), nothing about whether or not you know anything about SS or government accounting. This was based on your statement (perhaps you forgot?), "I don't know about Railroad Retirement."
I was commenting on the alternatives to RR Retirement, which was the main thrust of my post. That is to say, in response to the main question, as well as several subsequent posts regarding alternatives, I laid out some alternatives. Nothing more; nothing less.
Discussing the features of Social Security, 401(k) and 401(m) plans, and personal savings is hardly political. It could be considered political if one is advocating for one or the other. I have not done that. I was simply pointing out that there are alternatives to RR Retirement, which again is implied by the topic heading.
Most of the topics in these forums tend to range widely around the opening theme. No problem. Participants are free to say whatever they want as long as it is civil. And they are free to read it if they believe it is relevant, or they are free to ignore it.
Some of the contributions to RRR are invested. The link provided can explain it better than I can.
http://www.rrb.gov/mep/nrrit.asp
Jeff
Murphy Siding Exactly! And that's why no one on this thread is saying this.
Exactly! And that's why no one on this thread is saying this.
REALLY?? I could have sworn when the original post began "If RR Retirement was gone...Would people stick around in this industry? " that the implied subject was : if the retirement plan was ELIMINATED, then turnover would increase.
silly me.
There probably are very few people sticking around ONLY for the retirement. (the few guys within shouting distance of their retirement date being the notable exception) .
But we have to be honest - the RRT is a big part of the compensation package, and probably does keep many guys around.
It's been fun. But it isn't much fun anymore. Signing off for now.
The opinions expressed here represent my own and not those of my employer, any other railroad, company, or person.t fun any
To collect RRR, do you have to retire from a job on the railroad?
How much are the benefits keyed to what the employee actually put into the system?
What is the average percent of an employee's pay that gets withheld for RRR? More specifically, this would include both the part withheld from the employee and the amount matched by the employer. Somewhere I read that this number as pretty high. So I am curious what the percent actually is.
If you work for a railroad for say eight years, and then quit, do you simply forfeit what you have paid to fund RRR; or do you get some payback from it when you do retire. I always heard that was one drawback to getting RRR instead of SS, that is that if you quit a railroad job, you leave your contributions behind, whereas with SS, the benefits keep accruing no matter what jobs you do.
Convicted One Convicted One: I believe that if someone is in ANY industry for the retirement plan alone, then they are likely in the wrong business. Murphy Siding: Exactly! And that's why no one on this thread is saying this. REALLY?? I could have sworn when the original post began "If RR Retirement was gone...Would people stick around in this industry? " that the implied subject was : if the retirement plan was ELIMINATED, then turnover would increase. silly me.
I believe that if someone is in ANY industry for the retirement plan alone, then they are likely in the wrong business.
Murphy Siding: Exactly! And that's why no one on this thread is saying this.
Thanks to Chris / CopCarSS for my avatar.
Bucyrus,
Not necessarily...if you work and pay in for more than10 years continuous service, then the money you pay in is yours, sorta.
If you leave the RR industry and go to a job that withholds SS tax, and retire from that job, the law requires you draw from which ever fund is greater, until that fund is exhausted, and then draw from the other.
If you bounce back and forth, same thing applied, the greater fund is used first.
The link I provided earlier gives you time and percent paid out...
The fund invests because the return on the investments pretty much pay for the administration and management of the fund and creates a buffer amount to cover the few instances where retirees draw from the fund for a extended period,, or a employee retires early and draws in excess than what they paid in, doesn't happen often, but it happens.
Bucyrus To collect RRR, do you have to retire from a job on the railroad? How much are the benefits keyed to what the employee actually put into the system? What is the average percent of an employee's pay that gets withheld for RRR? More specifically, this would include both the part withheld from the employee and the amount matched by the employer. Somewhere I read that this number as pretty high. So I am curious what the percent actually is. If you work for a railroad for say eight years, and then quit, do you simply forfeit what you have paid to fund RRR; or do you get some payback from it when you do retire. I always heard that was one drawback to getting RRR instead of SS, that is that if you quit a railroad job, you leave your contributions behind, whereas with SS, the benefits keep accruing no matter what jobs you do.
23 17 46 11
Ed, its 5 years now.
Here is someone advocating a single payer national retirement / healthcare plan. The basis of the argument is that healthcare and retirements are fundamental human rights.
http://www.upte.org/lp/health/singlepayer.pdf
I think that is where we are heading. This rising pension funding problem, including SS and RRR, is just the tip of the iceberg. I expect the government to nationalize everyone’s 401K and roll them into a remodeled SS system.
SS will become the “single payer” pension plan, and everyone will be treated fair. No more big juicy pensions for some, but not all. We need a national pension system that is sustainable. This will happen within the next 2-3 years, and when it does, the national retirement plan will indeed be an entitlement. In other words, there will be no direct connection between a participant's contribution and their benefits.
Jack,
Go figure, bet it changed once I had 11 years in!
Bucyrus...
Not if I can help it!
Don't know what in the world would make anyone think I would want to support a couch potato slob with my sweat equity.
I earned every dime I ever received, and all the dimes I contributed to the RR Retirement fund, and see no reason to share it with those choose not to work or to save.
I have a 401K plan also, and a little "private" investment fund I manage myself, funded with money I earned....any reason I should give some of that hard earned money away?
Ed,
I can see what you are saying. I look at it the same way. But I am wondering if everyone else wants a totally privatized plan where your contributions are accounted for in your name; or if they might instead prefer to have thier contributions rolled into the overall performance of the system.
Murphy Siding OK. I kinda see where you got yourself lost on this one. When you quoted only part of what was written, you must have gotten confused about the meaning. Ironically, the part you trimmed was your own words. I agree, silly you.
OK. I kinda see where you got yourself lost on this one. When you quoted only part of what was written, you must have gotten confused about the meaning. Ironically, the part you trimmed was your own words. I agree, silly you.
No, I wasn't the one who was"lost",...at all.
the original post asked the question : "If RR Retirement was gone...Would people stick around in this industry?
Suggesting (abstractly, to avoid hurt feelings) that if you take away the cheese, some of the rats might go elsewhere.
And I was merely making a motivational analysis based upon the limited set of factors presented for consideration.
A retirement package certainly might be a factor in one's decision where to work, but if it alone were the determining factor, My feeling is that it (the career path) would be a life wasted.
Convicted One No, I wasn't the one who was"lost",...at all. the original post asked the question : "If RR Retirement was gone...Would people stick around in this industry? Suggesting (abstractly, to avoid hurt feelings) that if you take away the cheese, some of the rats might go elsewhere. And I was merely making a motivational analysis based upon the limited set of factors presented for consideration. A retirement package certainly might be a factor in one's decision where to work, but if it alone were the determining factor, My feeling is that it (the career path) would be a life wasted.
I wrote the post. I never said retirement alone was the determining factor - but it is one of the major ones.
IF (a) ...then WOULD (b)?
this isn't rocket science.
Well, it was MY thread, so I get to say what I meant.
(c) if you don't like it, then (d) go to another thread.
Sheesh.
I guess we should stick to talking paint schemes, then.
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