In most of the Optical Character Recognition softwares, a substantial percentage of errors are caused by the incorrect segmentation of degraded words. This is especially true for recognizing old books, newspapers and historical manuscripts. In this paper, we propose multiple segmentation methods which address the problem of cuts and merges in degraded words. We have created an annotated dataset of 1034 word images with pixel level ground truth for quantitative evaluation of the methods. We compare the methods with a baseline implementation based on connected component analysis. We report substantial improvement in accuracy both at character and at word level.