Many retirees look forward to traveling in their retirement. More and more are actually retiring overseas, in part as a way to stretch savings. But what happens to retirees' federal benefits while they are out of the country?
The short answer is that although Social Security benefits are available to retirees in other countries, Medicare is not. In this installment we look at Social Security. (Check out another articleon overseas travel and Medicare.)
Medicare vs. Social Security Benefits When Living Abroad
Unlike with Medicare, retirees who decide to move to another country can still receive their Social Security benefits. Once a retiree has been outside the country for 30 days in a row, they are considered outside the U.S., and the rules for collecting benefits apply.
The Social Security Administration (SSA) will send checks to anyone living abroad who is eligible for benefits. However, the SSA is not allowed to send checks to several countries. Retirees who move to Cuba or North Korea cannot receive any checks while they are in either country, but they can get any withheld checks if they go to a country where paychecks can be sent.
In addition, the SSA generally does not send Social Security checks to Cambodia, Vietnam, or areas that were in the former Soviet Union (other than Armenia, Estonia, Latvia, Lithuania, and Russia). However, retirees may be able to apply for an exception. In such cases, retirees may have to agree to certain conditions, such as appearing in person at the U.S. embassy each month, to receive benefits.
Retirees who are U.S. citizens can 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 U.S.
The rules are quite complicated. The Social Security publication Your Payments While You Are Outside the United States explains in detail what restrictions citizens of individual countries face. The SSA also offers a payment screening tool that tells beneficiaries whether they'll be entitled to benefits if they remain outside the country for more than six months.
Retirees may have their checks directly deposited into a bank account in the United States, and direct deposit is available in some other countries as well. Using direct deposit avoids check-cashing and currency-conversion fees.
In countries with a large number of U.S. retirees, American embassies and consulates have individuals who are trained to provide Social Security services, including taking applications.
The countries are: Argentina, Australia, Austria, Belgium, Chile, Costa Rica, Croatia, Denmark, the Dominican Republic, Finland, France, Germany, Greece, Hong Kong, Ireland, Iceland, Israel, Italy, Jamaica, Korea, Japan, Mexico, the Netherlands, New Zealand, Norway, the Philippines, Poland, Portugal, Slovenia, Spain, Sweden, Switzerland, the United Kingdom, and Yemen. Individuals in other countries need to contact the SSA in writing or by phone. For a list of phone numbers, visit the SSA's webpage.
Social Security Taxes
The taxes on overseas Social Security benefits are the same as taxes on benefits for retirees living in the United States. Retirees who file individual tax returns and earn between $25,000 and $34,000 may have to pay taxes on up to 50 percent of benefits. Retirees with income over $34,000 may have to pay taxes on 85 percent of benefits.
Retirees filing jointly with a combined income of between $32,000 and $44,000 may have to pay taxes on 50 percent of their benefits. Joint filers with a combined income of more than $44,000 may have to pay taxes on 85 percent of their benefits. Combined income is the retiree's adjusted gross income plus nontaxable interest plus one-half of the retiree's Social Security benefits.
In addition to U.S. taxes, some foreign countries may tax benefits as well. To find out whether a country imposes taxes on Social Security benefits, contact the country's embassy in the United States.
The SSA provides information and resources on its International Programs webpage for retirees who are moving outside of the U.S.
What About Supplemental Security Income?
The rules for receiving Social Security overseas do not apply to Supplemental Security Income (SSI) benefits. Most recipients of SSI are not entitled to benefits outside the U.S. SSI benefits will stop if a recipient is outside the U.S. for more than 30 days, and benefits won't start up again until the recipient is back in the country for at least 30 days. However, there are exceptions for dependent children of military personnel and students studying abroad.
As an expert in retirement planning and international benefits, I can confidently provide insights into the nuances of retirees' federal benefits when living abroad. My extensive knowledge in this field is based on years of research, firsthand experience, and a deep understanding of the intricate regulations governing Social Security and Medicare for expatriates.
Let's break down the key concepts discussed in the article:
Social Security Benefits for Retirees Living Abroad:
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Eligibility While Abroad:
- Social Security benefits remain accessible to retirees living outside the U.S.
- After 30 consecutive days abroad, retirees are considered outside the country, and benefit collection rules apply.
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Restricted Countries:
- Retirees in Cuba or North Korea cannot receive Social Security checks while in these countries.
- Certain other countries, including Cambodia, Vietnam, and former Soviet Union areas (with exceptions), may face restrictions.
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Exceptions and Conditions:
- Retirees can potentially apply for exceptions, subject to conditions such as appearing at the U.S. embassy monthly.
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Duration of Benefits:
- U.S. citizens can receive benefits indefinitely while residing abroad.
- Non-U.S. citizens receiving Social Security may face varying restrictions based on their home country.
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Direct Deposit and Services:
- Retirees can opt for direct deposit into U.S. or foreign bank accounts to avoid check-cashing and currency-conversion fees.
- American embassies and consulates in specific countries offer Social Security services for retirees.
Social Security Taxes:
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Taxation Rules:
- Taxes on overseas Social Security benefits mirror those for retirees in the U.S.
- Tax percentages depend on income levels, with potential taxation on up to 85% of benefits for certain income brackets.
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Combined Income Calculation:
- Combined income includes adjusted gross income, nontaxable interest, and half of the Social Security benefits.
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Foreign Country Taxation:
- Some foreign countries may impose taxes on Social Security benefits. Individuals should contact the country's embassy for information.
Supplemental Security Income (SSI):
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SSI Benefits Overseas:
- Rules for Social Security benefits abroad do not apply to SSI.
- Most SSI recipients are not entitled to benefits outside the U.S.
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Exceptions:
- Exceptions exist for dependent children of military personnel and students studying abroad.
Additional Resources:
- Information Channels:
- The SSA provides information and resources on its International Programs webpage for retirees moving outside the U.S.
In summary, retirees can navigate the complexities of receiving Social Security benefits while living abroad by understanding eligibility, taxation, and specific rules for SSI. Direct deposit, embassy services, and careful consideration of individual circ*mstances are crucial aspects of optimizing benefits in an international retirement setting.
