Many future retirees are considering retiring outside of the United States. In some cases, the reason is the lower cost of living in certain foreign countries that can stretch their retirement savings. If you plan to live abroad during your retirement years, you may wonder whether you have enough income to live the life you want.
Receiving Benefits as a U.S. Citizen Living Abroad
Although Social Security was not designed to be the sole source of income for retirees, it does provide benefits for those living abroad. If you are a U.S. citizen, you can continue to receive Social Security payments while living abroad if you meet two conditions.
You are eligible for the benefit. This means that you qualify for Social Security benefits based on your earnings record.
When you work and pay Social Security taxes, you earn “credits” towards Social Security benefits. The number of credits you need to receive retirement benefits depends on your birth year. If you were born in 1929 or later, you need 40 credits (10 years of work).
If you left the workforce (or the country) before earning enough credits to qualify for benefits, the credits will still remain on your Social Security record. If you return to work later, you can earn more credits to qualify.
The bottom line: The Social Security Administration cannot pay you any retirement benefits until you have the required number of credits.
You are in a country where the Social Security Administration can send payments. To find out if the Social Security Administration can send payments to the country where you plan to spend your retirement, use the Social Security Administration’s International Payment Check Tool.
You will be informed of your eligibility based on the country you specify as your new residence.
The Social Security Administration does not make payments to Cuba or North Korea. If you plan to live in either of those countries during retirement, your payments will be withheld and distributed to you when you move to a country where you can receive payments.
Similarly, you generally cannot receive Social Security payments while living abroad in Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Moldova, Tajikistan, Turkmenistan, Ukraine, or Uzbekistan.
In some cases, there may be exceptions for retirees living in those countries to receive limited benefits. If you do not qualify, your payments will be withheld until you move to a country without payment restrictions.
Note: The Social Security Administration defines a person living “outside the United States” as someone who has not been in one of the 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Guam, the Northern Mariana Islands, or American Samoa for at least 30 consecutive days.
Eligibility for Benefits as a Non-Citizen
If you are not a U.S. citizen, you must be eligible for benefits and reside in a country where you can receive payments. You also must meet one of the following conditions to receive Social Security payments while living abroad.
- You were eligible for monthly Social Security benefits in December 1956, or the person on whose record your payments are based died or became disabled while on active military service in the United States and was not dishonorably discharged.
- You meet the requirements for benefits based on your earnings and are on active military service, or you had employment in covered railroad work.
- You are a citizen of a limited group of countries, including Canada, the United Kingdom, South Korea, and Israel. You meet the requirements for benefits based on your earnings and are a citizen of a broader group of countries, including Mexico, Turkey, Costa Rica, and Jamaica. You are a citizen of countries such as China, India, Haiti, and South Africa, and you earned at least 40 credits in Social Security or lived in the United States for a decade.
- You are
- Residing in a country with an American social security agreement, such as Canada, Australia, Sweden, and Spain.
If you are unsure whether you meet the criteria, use the overseas payment checker tool. Once you determine that you are not a citizen, the tool will prompt you to answer some questions to find out if you can receive social security benefits while living abroad.
Note: If you are not a U.S. citizen or do not meet one of the requirements for receiving payments abroad, the Social Security Administration will stop making payments to you after you have been outside the U.S. for six months. Payments will resume when you remain in the United States for a full month.
How to Deposit Social Security Benefit Checks
If the Social Security Administration is able to send payments to the foreign country where you plan to retire, you have a few options. You can have checks sent to that country, or you can deposit them into a U.S.-based bank account or a foreign account located in a country with an international direct deposit agreement.
Direct deposit is the fastest and most secure way to receive payments. Remember that it typically takes longer to receive paper social security checks outside the United States.
Managing Healthcare While Living Abroad
Medical benefits for Medicare payments are only available in the United States. For this reason, it may not be wise to enroll and pay premiums for Medicare if you will be out of the country for an extended period.
However, if you did not enroll in Medicare and do so later, you will pay a 10% penalty for each year you could have enrolled but did not. If you have Part B coverage of Medicare and wish to cancel it, contact the Social Security Administration and request to cancel it.
Expect that premiums for Part B will continue for one more month after the month you notify the Social Security Administration.
Filing a Tax Return
If you are a U.S. citizen or a resident alien, the IRS will continue to track you after you retire abroad. Your worldwide income, including up to 85% of your social security benefits, is subject to federal income tax.
You will need to file a tax return in the United States each year, and you may also need to file a state tax return. You will also need to report any foreign bank accounts and financial assets to the Treasury Department each year.
Note: Even if you move to one of the few countries that do not impose income tax, such as Bermuda or the Bahamas, you will still have to pay income taxes in the United States.
Don’t Forget Foreign Taxes
Even if you have no earned income, you will be subject to tax laws in the country where you live. This means you may need to file a tax return there in addition to your U.S. tax return if you receive distributions from a 401(k), IRA, or pension.
Some foreign governments tax U.S. social security benefits, so it’s a good idea to contact the embassy of the country or an international tax attorney for tax advice. Deductions and credits can sometimes mitigate the impact of foreign tax payments or eliminate them entirely.
Frequently Asked Questions
When can you start collecting social security? You can start collecting social security at age 62 unless you are a widow or widower, in which case you can collect social security at age 60. However, collecting social security at age 62 will reduce your benefits. To receive full benefits, you must wait until age 65. You can receive additional benefits if you wait longer to start collecting social security.
How much
You can earn while collecting Social Security? You can earn as much as you want while collecting Social Security, but you will owe more taxes if your income exceeds a certain threshold. Your income and the age at which you started collecting Social Security will affect your specific rate. In 2021, the annual income limit to avoid additional taxes is $18,960.
Source: https://www.thebalancemoney.com/can-you-receive-social-security-living-outside-united-states-4147562
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