One of the questions most frequently asked by North Americans considering a move overseas in their retirement years is: “Can I Claim Social Security Overseas?”
According to a recent survey, 69% of unretired baby boomers (ages 60 to 78) and 56% of Gen Xers (ages 44 to 59) say they’ll be reliant on Social Security benefits to cover essential living costs when they retire.
With the current monthly Social Security retirement benefit amounting to $1,931.20, as per the latest figures from the Social Security Administration (SSA), little wonder it’s such a key part of retirement planning.
In addition, with the Social Security Fairness Act now signed into law and repealing the Windfall Elimination Provision, many U.S. expats will see higher monthly Social Security payments.
The Windfall Elimination Provision was designed to reduce Social Security benefits for individuals who worked in jobs not covered by U.S. Social Security but which also qualified for a foreign or non-covered pension. This included teachers, police officers, and firefighters who earned pensions outside of Social Security and U.S. expats who contributed to social security systems outside of the U.S.
Since the Windfall Elimination Provision was repealed, more than $7.5 billion in retroactive payments have been made with the average individual payment standing at $6,710.
Generally speaking, to be eligible to receive Social Security benefits, people must have reached the age of 62, and also must have paid into the program for 10 years or more. An individual’s monthly Social Security benefit amount is based on his or her highest 35 years of earnings. In some cases, dependents are eligible.
The good news for those considering an overseas retirement is that as a U.S. citizen, you can receive your Social Security payments outside the U.S. for as long as you are eligible for them, in most other countries (indeed, as the SSA reports more than 700,000 Social Security recipients currently do)—though there are some exceptions.
For example, The U.S. Department of the Treasury prohibits making payments to residents of both Cuba and North Korea. In addition, Social Security payments generally cannot be made to those residing in Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan. However, exceptions can be made.
If you do not meet the qualifying requirements for an exception, the Social Security Administration will withhold your payments until you leave the restricted country and go to one to where payments can be made.
The Social Security Administration defines living outside the United States the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Guam, the Northern Mariana Islands, or American Samoa for at least 30 days in a row. If you return to the United States and stay for more than 30 consecutive days, you are no longer considered to be living abroad.
If you are not a U.S. citizen or fail to meet one of the conditions for continued payments and spend six full calendar months outside the U.S., the Social Security Administration will stop your payments. In order to restart them, you will need to return to the U.S. for a minimum of a full calendar month.
Most Social Security recipients abroad receive their benefits electronically to a U.S. bank or financial institution in a country with a direct-deposit agreement with the United States.
If you use a bank outside the States, you may be charged fees on international transactions which you will have to cover the cost of.
Alternatively, you can opt to have your payment deposited in your U.S. account and then decide when to move it overseas based on exchange rates, wire transfer costs, and how much you require.
It is also possible to receive your Social Security check by mail but bear in mind not all countries have a reliable postal service, the process will also take longer than electronic transfer, and should your check get lost or stolen getting a replacement issued will take time.
As an overseas recipient of Social Security payments you will be sent a questionnaire every year or so, asking you to confirm you are still eligible for benefits. It’s important to complete this questionnaire as failure to do so could see them stopping your payments. It’s also crucial that your keep the Social Security Administration informed of any change of address for receipt of this questionnaire.
As a U.S. citizen or Green Card holder, you are subject to U.S. income tax laws no matter where in the world you live. This means that your income—including up to 85% of your Social Security benefits—may be subject to federal income tax. In addition, many foreign governments tax U.S. Social Security benefits, so it’s important to look into your tax obligations carefully before making your move.
The Social Security Administration’s Payments Abroad Screening Tool will help you work out if you can collect your Social Security payments in your chosen overseas destination.