Britain's recent decision to exit the European Union has dominated world headlines and underscored the interconnectedness of our global economy. For many financial advisers, headlines about immigration and international employment issues strike close to home following an uptick in the number of foreign-born clients.
That has raised questions about whether those clients can collect the Social Security benefits they earned by working here or marrying a U.S. worker, particularly if they decide to retire to their home country or elsewhere abroad.
As with so many aspects of Social Security rules, the answer is complicated. It depends on the worker's immigration status, years of residency in the U.S., country of origin and whether that nation has a bilateral agreement with the U.S. Advisers may want to download a copy of “
Your Payments While You are Outside the United States” for a complete list of countries and circumstances that govern Social Security benefits.
Many people are surprised to learn that you do not need to be a U.S. citizen to qualify for Social Security benefits. But foreign workers need a Social Security number to work in the U.S., and to obtain a number, they must document their immigration status and authorization to work here.
Anyone who has satisfied the minimum 40 quarters of covered wages by working as least 10 years in the U.S. is eligible to receive Social Security benefits. For citizens and noncitizens alike, Social Security benefits are based on the top 35 years of indexed earnings.
But when it comes to collecting Social Security benefits, citizenship matters. U.S. citizens can receive Social Security benefits almost anywhere in the world. Rules are different for noncitizens.
For some foreign workers, their Social Security benefits will stop once they have been outside of the U.S. for six months and will not resume until they return to the U.S. Additional residency restrictions may apply to those receiving Social Security benefits as a dependent or survivor.
Generally, citizens of most European countries, Canada, Israel, Japan and South Korea can receive Social Security benefit payments wherever they live. This list is subject to change, so it is important to
check the latest information.
Rules are stricter for citizens of many Caribbean and South Pacific islands, Central and South American countries, including Mexico, as well as Turkey, Australia and some eastern European countries. Workers who are
citizens of these countries can continue receiving their Social Security benefits if they reside outside the U.S., but their dependents and/or survivors may be subject to additional residency requirements. Spouses, minor dependent children and survivors must prove that they lived in the U.S. for at least five years and that the family relationship on which those benefits are based continued during those five years.
Citizens of India as well as many African, Asian and Middle Eastern countries, can collect Social Security benefits outside the U.S. if they have earned the minimum 40 quarters of covered earnings. But their dependents or survivors must have lived in the U.S. for at least 10 years in order to
collect benefits elsewhere in the world.
In addition, 25 countries have bilateral agreements with the U.S. to help Americans working in those countries, as well as citizens of those countries who work in the U.S., to avoid double taxation and to qualify for future Social Security benefits.
If you work overseas for an American company or, in some cases, a foreign company that is affiliated with an American company, you and your employer may have to pay Social Security taxes to both the U.S. and the foreign country on the same earnings. But if you work in one of the
agreement countries, your Social Security coverage will be assigned to either the U.S. or the foreign country so you and your employer do not have to pay taxes to both. Agreement countries include most western European counties as well as Australia, Canada, Chile, Japan and South Korea.
These agreements help people who have worked in both the U.S. and an agreement country but who have not worked long enough in either country to qualify for Social Security retirement, disability or survivor benefits. Under an agreement, each country can count your work credits in the other country if this will help you qualify for benefits.
For example, if you earned at least six Social Security credits in the U.S. but not enough to qualify for a benefit, the Social Security Administration can count your credit in a country with an agreement to make up the difference. The other country can also use your U.S. credits to help you meet the eligibility requirements for foreign Social Security benefits.
Finally, individuals who earn foreign pensions as well as a U.S. Social Security benefit may be subject to Windfall Elimination Provision rules that can reduce Social Security benefits. To determine if your pension may be subject to WEP reductions, visit the
foreign pension screening tool.
(Questions about new Social Security rules? Find the answers in my new ebook - Maximizing Social Security Retirement Benefits.)
Mary Beth Franklin is a contributing editor to InvestmentNews
and a certified financial planner.
