Social Security – that onerous tax we pay to work in the United States, supposedly for our own retirement but it seems to be more to fund those who are already drawing on it! I have quite a few clients who are on temporary work visas here in the US. They rightfully question whether they will be able repatriate Social Security when they are eligible to draw on it. Or there are those US Citizens who travel after they retire and may even choose to settle abroad or go back to their home country if they had migrated to the USA.
Are You A US Citizen or Not?:
Retirees who are U.S. citizens are entitled to continue receiving benefits for as long as they live outside the United States. However, citizens of other countries who receive Social Security may have some restrictions on how long they can receive benefits while outside the United States.
There are some countries where the Social Security Administration (SSA) will not send social security checks. Do look for the complete list of such countries on the SSA website, if it’s your plan to retire abroad.
How Can I Actually Receive My Social Security Income and For How Long?
Like I said earlier, citizens of other countries who receive Social Security may have some restrictions on how long they can receive benefits while outside the United States. These rules are quite complicated. To get a quick overview, the SSA publication, “Your Payments While You Are Outside the United States“, explains in detail what restrictions citizens of individual countries are subject to.
Recipients of Social Security Income can have their checks directly deposited into a bank account in the United States, and this service is also available in some other countries. As you can imagine, using direct deposit avoids check-cashing and currency-conversion fees.
In many countries where there are a large number of U.S. retirees, American embassies and consulates have officers who are trained to provide Social Security services, including taking applications. Phone numbers for Office of International Operations are listed on the SSA Webpage here.
Taxation of Social Security Benefits/ Income:
If you are a US Citizen living abroad, you know you have to file a US tax return showing “world-wide” income and taxation of your social security benefits are subject to the same rules as if you were living in the US. Your total income together with your social security income determines whether and how much of your benefits are taxable. More than 85% of your Social Security Benefits cannot be taxed. This involves complicated calculations and is best left to your tax professional to determine.
In addition to U.S. taxes, the country of your residence may tax benefits as well. If you would like to find out whether a country imposes taxes on Social Security benefits, you could contact the country’s embassy in the United States.
Also, remember you will have FATCA obligations.
Renunciation of US Citizenship & Consequences:
If you have renounced your US citizenship, you are considered a non-resident alien (NRA). Now the US Social Security rules for NRAs will apply to you. It is your responsibility to notify authorities of your changed status.
As an NRA, depending on your country of residence, you can generally continue to collect US Social Security in the long run. Bilateral agreements (or lack thereof) with the US & your country of residence, your social security payments maybe be completely discontinued after more than six months outside the US or there may be only a minor tax adjustment to your social security payment.
Social Security Income and benefits in itself is an exhaustive topic and cannot be covered in one blog post. Please do contact a trained tax professional, such as an Enrolled Agent, to give you specific advice as per your requirements.
Bibliography: ssa.gov; American Citizens Abroad; Social Security Lectures & Webinars.
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