Hi, I'm jj

[jj]

Hi y'all,
I've been lurking on this board off and on since March and thanks go to all regular posters for the wealth of information discussed here. It's difficult to talk to friends about a lot of the personal stuff that is posted here but when making the decision about when to retire it's crucial to be able to bounce those thoughts off someone else. With this board I hope I've found how to do that anonymously.

We are aged 50 and 45, with three sons (6th, 8th and 10th grades) and we think we have "enough" to be able to retire. In fact, we are in a similar situation to Blake who posted here in the last couple of weeks. We have run Fire-Calc and barring an absolute catastrophe at our current levels of expenditure (6 years of MS Money data) we can easily survive.

Other complications in our situation are that we are British citizens (green card holders). We have only been here for 6 years and therefore have not built up enough credits for either Medicare or Social Security yet. From looking at the government site it appears that the US govt will look at the social security record from another country in which there is a work record and pick up credits from there. Does anyone have experience of this? In any event it may not matter if SS bites the dust within the next 15 years.

Furthermore, we are not completely comfortable with how the tax system works here. We have always had someone else prepare our taxes and are unsure of our understanding of the rules. Using MS Money's retirement calculator it tells us that in retirement our tax rate would be in excess of 20%. I cannot see how it could be so much when all our living expenses will come from dividends, capital gain and a small amount of interest from cash accounts. In addition, we have property taxes of $12,500 (Texas!) and presumably all our medical insurance and expenses will be tax deductible. My view is that we will not be able to generate enough income to offset the allowances we have each year - but am I missing something? (DH thinks I am) Can anyone recommend a good tax program to purchase which will allow us to model our tax situation in retirement and give us some peace of mind on the tax front?

I think there are enough issues here for my first post! I await your replies with curiosity.

jj

 

[sgeeeee]

Hi jj,

Welcome and congratulations on your eminent retirement.

I like TurboTax as tax computation software. I haven't compared it to other programs because I get TurboTax free. But it is very simple to use. The program interviews you much like a tax advisor would then computes tax. There is a tax estimator portion of the program that would help you answer your tax expectation questions fairly easily. You used to be able to download a version of the program for free to try it out.

Good luck.

 

[jj]

salaryguru,

Thanks for replying, I must admit TurboTax is the only tax software I've heard of. Good to hear that you like it. Just out of interest, how do you get it free?

 

[Hyperborea]

Other complications in our situation are that we are British citizens (green card holders).

Are you going to stay in the US in retirement, return to Britain, or go somewhere else?  That answer changes a lot of things.  I'm a Canadian/Scot (dual citizenship) and I'll be leaving the US when I FIRE.

We have only been here for 6 years and therefore have not built up enough credits for either Medicare or Social Security yet.  From looking at the government site it appears that the US govt will look at the social security record from another country in which there is a work record and pick up credits from there.  Does anyone have experience of this?

No experience but I have read all the docs on this (the specific treaty for my country of work history plus the general docs and a glance at the other treaties) and it is essentially ZERO dollar credit years from your work experience in other countries.  Those ZERO dollar years give you zero dollars to your SS calculations but enable you to have the required 40 quarters (10 years).

You can read the general docs here:
http://www.socialsecurity.gov/international/your_ss.html

and the treaties here:
http://www.ssa.gov/international/agreement_descriptions.html

 

[Zipper]

I'm Canadian, born St. Thomas On 1943. Mrs. Zipper was born in Harrogate England in 1949 and emigrated to Canada in 1952.

She has a UK/EU passport, and technically is still a landed immigrant, even though she was 3 when she came here, was educated, married me (Canadian) in 1969, and had 2 children.

She has always voted, so Ottawa thinks she is Canadian.

Since 9-11 though, the cracks have been filling in at the border, so she will probably have to get a Citizenship card if we head to FL or whatever.

She will continue with her UK passport, however, like Hyper. Our sons can claim UK/EU access because of their mother.

Mrs. Zipper goes to the head of the line when entering customs in the UK. Canadians like me are lumped in with "the others".

Mrs. Zipper has aunts living in Albuquerque and Napa. Long since citizens after marrying Americans.

jj, you seem to be paying a sh*tload of property taxes in Texas!

You would have to put up with snow in ON for 3 mo. My son lives in Vancouver and they really don't get much.

Health care is world class and free.

Retire here and winter back in Texas!

 

[jj]

Thank you Hyper/Zipper for replying.

I had spent many hours previously on the ssa.gov site looking for information on how exactly they compute the figures for foreigners who haven't quite earned enough credits to get a pension. So thanks for that.

Although nothing is ever finally decided, I think we'll end up staying in the US after we retire. We shall certainly stay until the boys finish high school, after that who knows? I see a scenario where the boys marry american girls (or guys, let's not be discriminatory here ) and then the grandchildren will follow and we'll never leave. The cold European winters don't thrill us after 6 years in Texas. What's the opposite of a snow bird? We could always travel up to Canada for the beautiful summers to get away from the oppressive heat here. I have been interested recently in the threads to do with the various tax consequences of living in different states. Having a big house in Texas is not a good thing with property taxes the way they are here. I know this is running into a parallel thread but our prop taxes here are $12,500 pa on a $475,000 assessed value house which would probably sell for $550,000 at most, then there would be the realtor's fees. In addition to that we have "assessments" - which can't be claimed against income taxes - of an additional $2750 pa from the Homeowner's Association. We are not gated or anything like that - in case you were wondering. It makes this part of Texas an expensive place to own property. But... they have very good schools here and we don't have to pay private tuition. We've moved around enough - the Netherlands and Germany before here - and relish staying for a goodly amount of time in one house. After the kids have graduated high school we'll down-size to a smaller cheaper house.

I hadn't picked up before that you are Canadian Zipper. Say Hi to your wife from me. It certainly can be useful to have a dual nationality - it leaves your options open. Now that we have green cards getting through immigration at the airports has been easier. The lines for the visa holders when I last came through in March were horrendously long and I suspect I would've missed my onward connection had I not been able to go through as a resident.

Zipper, do your sons think they might ever go live in Europe? As for the prospect of moving to Canada for the free healthcare, notwithstanding that we might not be let in, aren't the income taxes very high there?

 

[Hyperborea]

Although nothing is ever finally decided, I think we'll end up staying in the US after we retire.

Ok, you do run into the issue of eligibility for Medicare then. You will have to make sure that you work long enough for this (roughly 10 years of a job paying Medicare taxes). If not then you will have the very costly prospect of buying health insurance for the rest of your lives.

We shall certainly stay until the boys finish high school, after that who knows?

Ok, but be aware that the US is one of the few countries in the world that taxes their citizens and green card holders no matter where they live. To maintain that hold over their "citizens" the US maintains a very large exit tax called the expatriation tax. If you have enough to retire nicely then you have enough to fall under this tax. If you've had a green card for 7 of the last 15 calendar years then you will be subject to this if you decide to leave. You can "request" a ruling to get out of this in some special cases but it is expensive and not guaranteed.
http://www.irs.gov/publications/p519/ch04.html#d0e4115

aren't the income taxes very high there?

Not in general. The rules of the tax system are different and that will produce different results for some. Overall, after experiencing the two I would say that they are roughly comparable.

 

[SDY888]

Hello jj

WRT health care issues, would the UK National Health System not still provide a fall back in the event of (God forbid) any serious health issues?? I understood that even though you have been outside the UK (and presumably not paying UK Tax nor making NI contributions) that the right to universal health care was inalienable. Thus repatriation to the UK for major health issues would always be available (though less desirable). Correct??

Best wishes

Simon


To digress somewhat on the tax issue mentioned by Hyperborea, I have always observed it to be almost obscene the way the US Gov. seeks to tax it's citizens wherever on the face of planet they happen to live and earn.

 

[samclem]

jj,

- Welcome-- I hope you stay.

-- TaxCut is another program which, like TurboTax, is very easy to use. Both are solid programs that are intuitive.

Simon8888,

-- So, some countries don't tax their citizens living abroad but will provide them medical care? Sounds like a bad deal for the folks back in the old country footing the bill.


samclem

 

[SDY888]

  -- So, some countries don't tax their citizens living abroad but will provide them medical care?  Sounds like a bad deal for the folks back in the old country footing the bill.  


samclem

samclem,

Two parts to that question: Firstly, for the perpetual health care provision, as I said, I understand that to be the case with the UK, but I am not 100% certain. Perhaps jj / someone could clarify, because if my understanding is correct, it would provide a safety net absent US Medicare qualification??

''Most'' countries do not tax their citizens/subjects if they live/work/earn outside of their home country - the US (possibly Japan and Canada??) are the only ones to my knowledge that do. Certainly the UK doesn't tax citizens after the first 12 months abroad, and if you stay outside the country thereafter then the tax paid for the first 12 months overseas is refundable.

A bad deal for the folks back in the old country footing the bill?? Absolutely it is a bum deal.

Simon888

 

[Hyperborea]

''Most'' countries do not tax their citizens/subjects if they live/work/earn outside of their home country - the US (possibly Japan and Canada??) are the only ones to my knowledge that do.

I think there are only 2 countries other than the US that tax based on citizenship and they were small countries (one was central European IIRC).  So that "most" is pretty much an "all other".  It's a pretty strong claim from the US government that US citizens are owned by the US government - you owe them taxes on whatever you do no matter where in the world you are and they make it difficult to impossible to fully break that tie.

Canada and Japan do not tax on citizenship only on residency though there are some requirements needed to "break" residency.

 

[SDY888]

Thanks, Hyperborea, for the clarification.

Simon888

 

[jj]

It is my understanding that you are correct that UK citizens can return home for free medical care. In fact we even joked about it recently at home when our son had a broken bone which had to be surgically pinned and it cost us a fortune in co-pays etc. However, the Britsh Inland Revenue (approximates to the IRS) gets you with inheritance tax in the end! All British citizens are assumed to be "domiciled" in the UK, even if they haven't lived there for "x" years! This concept of "domicile" is a legal one, but in essence it implies that unless you have taken up domicile in another country permanantly and indefinitely the UK will assess your estate for inheritance tax. Inheritance taxes in the UK are steep (40%) above an allowance of 263,000PS (tax year 2004/5) which is about $500,000 at the current exchange rates (in more normal times about $400,000). Anyway, my point is - going back to the UK for a hip replacement on the NHS would likely scupper your attempts at losing your UK domicile and avoiding UK inheritance tax! if somebody knows otherwise please let me know.

 

[JWV]

This

So, some countries don't tax their citizens living abroad but will provide them medical care? Sounds like a bad deal for the folks back in the old country footing the bill.

ergo

(returning to) UK for major health issues would always be available (though less desirable)

There is no free lunch.

Judy

 

[jj]

This


There is no free lunch.

Absolutely!!

 

[jj]

Quote "Ok, you do run into the issue of eligibility for Medicare then.  You will have to make sure that you work long enough for this (roughly 10 years of a job paying Medicare taxes).  If not then you will have the very costly prospect of buying health insurance for the rest of your lives."

Thanks for the heads-up on this Hyper. We shall have to seriously consider this before we pull the plug - we have been told (by someone?) that you can buy medicare coverage, but maybe they were referring to the Part B, and not the hospital Part A. You're right, if we are going to stay, to minimize our costs we really ought to make sure we have the 40 credits for SS and Medicare Part A otherwise we fall into a hole in the system.

I can't get the quote box to work - what am I doing wrong?

 

[Hyperborea]

Thanks for the heads-up on this Hyper.  We shall have to seriously consider this before we pull the plug - we have been told (by someone?) that you can buy medicare coverage, but maybe they were referring to the Part B, and not the hospital Part A.  You're right, if we are going to stay, to minimize our costs we really ought to make sure we have the 40 credits for SS and Medicare Part A otherwise we fall into a hole in the system.

Hah, you learn something new every day!  I took a look around the Medicare site (http://www.medicare.gov/default.asp) and apparently you can buy Part A.  That's the good news.  The bad news is that the premium in your case (less than 30 quarters) is $375 / month each - that's $9000 / year for the two of you and that's just for Part A.

You could downsize your job and do just about anything else where you pay Medicare taxes - i.e. work two days a week at the local library.  It's not quite retirement but it's a lot closer and if you are stressed out enough to want to retire it might be close enough.  I wouldn't worry about staying on the job for the SS improvement.  You'll be eligible (using the SS treaties) and the amount may be small but if you have enough in your savings the improvement won't be huge compared to the extra number of years.

As for quote, you can hit the quote button when you reply (upper left corner of the message you want to reply to) and all of the other person's message will be quoted.  Delete whatever bits aren't relevant - don't quote the whole thing if it's not pertinent.  You can also just stick in a quote by putting a [ quote ] at the beginning of the quoted text and a [ /quote ] at the end.  Remove the spaces between the brackets and the quote or /quote (I had to leave them in or the board software would interpret them).  It's somewhat like HTML if you are famiilar with that.

 

[Hyperborea]

Anyway, my point is - going back to the UK for a hip replacement on the NHS would likely scupper your attempts at losing your UK domicile and avoiding UK inheritance tax!

That's reasonable. If you wish to use the services of the UK then you are a UK resident - that's reasonable. If I were to use the UK or Canadian health care systems then I too would become a resident and subject to their tax laws.

The US has decided that if you have US citizenship that alone is enough reason to tax you no matter where you live and no matter what you do for life. It could be that your parents where US citizens and you were born and grew up somewhere else. Or born in the US say to expat parents on short term work visa. It doesn't matter the US "owns" you and wants their pound of flesh.

You can try and get up and leave and with all the hoo-haw in the US about "freedom" you think you could. Nope, if you want to cease being a US possession then you've got an enormous number of hoops to jump through and they'll take the pound of flesh for 10 more years after you've gone. If the country is so great and nobody should want to leave why are they trying to lock the exit door?

 

[charlie]

Hyper, I am getting sick and tired of you slamming the
US all the time. OBLAY EMAY!

 

[Hyperborea]

Hyper, I am getting sick and tired of you slamming the US all the time.

So, which of the statements I made above upsets you?  Which facts should I leave out so that I don't upset your tender sensibilities? Or are you really upset about the "shoes in the house"?

OBLAY EMAY!

Converse back at you!

 

[charlie]

Hyper, on this thread and many others you constantly
rag on the US and never find anything good to say
You and your ilk make me sick. You come here from
God knows where to make money and then plan to
retire outside the country. You rant about our politics
and morals and demean our values .... go back under
the rock you came from.

Charlie

 

[SDY888]

Charlie

In several months enjoying and learning from the posts on this board I have not observed anything approaching a ''.. rant about our politics and morals and demean our values....''

Hyper is entitled to express his view, as we all are, and his opinions as expressed on this thread are based upon facts rather than emotional vitriol. One may disagree with his views, Charlie, but the right to express those views (in a reasonable and civilised manner) should be protected at all costs. That's democracy, or would you prefer the alternative??

I think it is unfair to sabotage ''jj's'' thread, where further valuable comments and input may be exchanged. I for one have done some further research on the Health Care issues previously discussed and would like to share that information.

Might I suggest that you start a new thread for yourself entitled ''Immigrants with Opinions Please Go Home!!'', where I am sure you will feel more comfortable.

S888

 

[Nords]

Now waitaminnit...

Hyper, on this thread and many others you constantly rag on the US and never find anything good to say.

Ya know, Charlie, you may have shot from the lip on this one. I'm no Hyper shill, but a review of his last 50 posts doesn't even seem close to rant territory.

http://early-retirement.org/cgi-bin/yabb/YaBB.pl?board=;action=usersrecentposts;username=Hyperborea

Were you reading this board when Ted was at his ranting finest? Hyper wouldn't even make the cut.

http://early-retirement.org/cgi-bin/yabb/YaBB.pl?board=;action=usersrecentposts;username=Ted

It's not as if Hyper's trying to say that Canada (or wherever he decides to retire) is better than the U.S. He's pointing out some interesting & problematic issues that I'd never have discovered on my own, and perhaps it takes an "outsider's" perspective to make us appreciate those issues. Frankly, most of his criticism appears to be directed at the government and the IRS-- hardly undeserving targets! And dare I say that much of the negativity might even possibly be interpreted as homesickness. After all, work brought him here of something less than his own free will.

I'm not trying to justify or even defend Hyper's remarks. But I'd like to think that when I go off on a similar riff about Congress or tax laws that I'm not going to be singed by your flamethrower too...

 

[SDY888]

All British citizens are assumed to be "domiciled" in the UK, even if they haven't lived there for "x" years! This concept of "domicile" is a legal one, but in essence it implies that unless you have taken up domicile in another country permanantly and indefinitely the UK will assess your estate for inheritance tax........ Anyway, my point is - going back to the UK for a hip replacement on the NHS would likely scupper your attempts at losing your UK domicile and avoiding UK inheritance tax! if somebody knows otherwise please let me know.

jj,

A vital point to clarify is ones current status and to avoid confusion in terminologies - domicile, residence, citizen, domicile of origin, Not ordinarily resident etc etc. and their respective impact about the three topics under discussion: Social Security, Medical Care and Inheritance taxes in the UK for expatriate British Citizens.

As I opened this avenue with my comment on the use of the ''free'' National Health System, I felt kind of responsible for clearing up some of the points! BTW, free is in parenthesis as certain minor charges are levied for some services, prescriptions etc.

I have checked with the Inland Revenue, The Immigration and Nationality Directorate and the Department of Health along with placing requests for info from National Insurance people and the Benefits Agency. This post is the distillation of the info collated to date.

Firstly, the basis upon which the right to access the National Health system is not directly connected to ones residence status in the UK, nor ones actual place of nominal residence or a ''Not-Ordinarily Resident'' status (which I would guess is the status you currently hold as far as the UK is concerned). The primary basis of entitlement are - ones British Citizenship and history of National Insurance contributions, either in full whilst living / working in the UK when NI would be deducted at source under the PAYE system or at the minimum Class C level (about 300 Pounds a year) whilst an expatriate. Provided a person has sufficient NI contribution credits, access to the National Health System remains intact. Even if there is a gap in NI contributions, the opportunity to catch up is flexible and can be made in instalments over several years. At only 300 pounds a year it is worth it, it seems to me.

Also, the NI contribution history would determine the level of State Old Age Pension and other benefits you could receive (noting that these benefits again are not affected by ones actual location of residence)

Payment of NI and / or the use of the UK National Health system has no bearing whatsoever on ones domicile and subsequent inheritance tax issues. A visit for health care would not, I am informed by an Immigration lawyer, materially affect ones existing domicile status, nor would it ''zero the clock'' if one had accumulated a number of years outside the UK with the view of attaining non-domicile status. The domicile status is obviously complex and dependant upon personal circumstances such as time away, the possession of a residence in the UK, frequency of visit, the residence of dependant children etc etc. I have not received unequivocal rules of domicile as the variables are too numerous, but this is the general drift. Also, domicile and citizenship are similarly non related. One can be non-domiciled as far as the UK is concerned but still be a British Citizen and passport holder enjoying full Consular Protection.

Lastly on the Inheritance Tax, remember that the UK does not tax inheritance between spouses, it is only an issue as between the surviving spouse and children and then only if the non-domicile issue is still unresolved. One prays that when that time comes, the domicile issue would be resolved, and so the UK inheritance tax issue would be moot. NB: this holds except for property of the Estate physically existing inside in the UK (maybe an old house?) but legal advice and estate planning should overcome that obstacle.

In conclusion then, jj, I do believe that a) ''free'' UK National Health is available to you should you so wish and to avail yourself of such care (other than for long term i.e. years and years) would not affect either Inheritance issue nor you domicile or residence issues.


I trust you will find this of use, if only as a reassuring fall back should the worst come to the worse.

All the best,

Simon888

 

[jj]

There is really interesting (to me) information being posted here. Thank you to everyone!

Our feelings at the moment are that we are likely to stay in the US as permanent residents indefinitely, whether we may spend months at a time outside the country traveling when the kids are grown is another matter. We will continue to pay our taxes to the IRS. What we are seeking to do is cover our bases such that if these plans do not come to pass we have a fall back position.

Simon, your point about not necessarily losing a "domicile" elsewhere if one uses the NHS is interesting. In the past we have taken advice from various experts, admittedly on other matters, but have never found anyone prepared to stick their neck out and give unequivocal rules! They are always very vague, leaving you really no better off than before you took the advice - in fact, financially usually 000's worse off.

My experience of using the NHS since we are no longer resident is taking one of the boys into my parents' GP for an office visit. At that time we were living elsewhere in the EU - and there are schemes to allow EU member residents to obtain healthcare. We registered as temporary residents, and were not required to provide any details other than our home address. I'm sure that I didn't have to give details of my National Insurance # (UK equivalent of a SS#). We received care without having to pay anything, just as a UK resident would. Even the prescription charge was free (children and seniors receive free prescriptions). I certainly have the impression that if we had been visiting from the US it would be the same - no charge - but a hospitalization may be different.

Thanks to Hyper for researching the Part A medicare payment. This was better news for us than you knew. We have 28 SS credits so far and therefore only need next years' credits to break the 30 barrier and qualify for the lower amount, $206pm instead of $375. These premiums seem to be increasing by about 10% every year which is something to consider, but at least we know what they are now and can either plan to work the two extra years or not.

My next job is to research these tax programs - and ask Santa for one for Christmas