Dual Citizenship Strategy?

[Alan]

I was born in the UK in '55 ....

So was I

 

[Purron]

So was I

How interesting. Both of us born in the UK in '55 and both of us ended up in the USA. Very different paths leading to a similiar place. I feel very fortunate to be connected to both countries. I love them both.

 

[nun]

You can qualify for a social security pension from two (or more) countries if you have the required number of contributions. The obvious way to get them is to work in both countries. Say you work for 20 years in the UK and then for 20 years in the US, you'd get a pension from both countries, but it would be less than full benefit because of your less than complete work record.

However, if you are able to make voluntary payments into a social security system while you are working in another country you can get full pensions from two countries.

For example, consider a UK citizen who moves to work in the US at age 25. The UK allows them to make voluntary UK National Insurance contributions and they must obviously also pay FICA. If they work until age 55 they will have 30 years of payments into both the US and UK systems and will qualify for full benefits from both.

 

[george76]

You can qualify for a social security pension from two (or more) countries if you have the required number of contributions. The obvious way to get them is to work in both countries. Say you work for 20 years in the UK and then for 20 years in the US, you'd get a pension from both countries, but it would be less than full benefit because of your less than complete work record.

However, if you are able to make voluntary payments into a social security system while you are working in another country you can get full pensions from two countries.

For example, consider a UK citizen who moves to work in the US at age 25. The UK allows them to make voluntary UK National Insurance contributions and they must obviously also pay FICA. If they work until age 55 they will have 30 years of payments into both the US and UK systems and will qualify for full benefits from both.

Correct me if I'm wrong, but I thought I heard somewhere that if you work for an employer who does not withhold Social Security taxes from your salary, such as an employer in another country, the pension you get based on that work may reduce your Social Security benefits.

 

[MichaelB]

Correct me if I'm wrong, but I thought I heard somewhere that if you work for an employer who does not withhold Social Security taxes from your salary, such as an employer in another country, the pension you get based on that work may reduce your Social Security benefits.

[-]A social security pension from another country will not affect the one you receive in the US unless there is a treaty to that effect in place.[/-] Nevermind

 

[Alan]

Correct me if I'm wrong, but I thought I heard somewhere that if you work for an employer who does not withhold Social Security taxes from your salary, such as an employer in another country, the pension you get based on that work may reduce your Social Security benefits.

As Nun says, you get SS based on your contributions.

Having worked and made some contributions into both the UK and US SS systems I am entitled to a reduced SS in both countries. I only contributed for 23 years into the US system and the amount you get is based on 35 years, so I have 12 years with zero FICA payments. (I had a 7 year period where I paid into both systems).

 

[george76]

As Nun says, you get SS based on your contributions.

Having worked and made some contributions into both the UK and US SS systems I am entitled to a reduced SS in both countries. I only contributed for 23 years into the US system and the amount you get is based on 35 years, so I have 12 years with zero FICA payments. (I had a 7 year period where I paid into both systems).

Thanks for clarifying. I had been told by my local SS office that my benefits would be reduced based on my work in a foreign country. They claimed that the 23 years of contributions (as an example) would be further reduced by some complicated formula they had based on how much my foreign pension added up to. I'm years away from having to deal with it, so I guess I won't worry about figuring it out just yet.

 

[nun]

Correct me if I'm wrong, but I thought I heard somewhere that if you work for an employer who does not withhold Social Security taxes from your salary, such as an employer in another country, the pension you get based on that work may reduce your Social Security benefits.

You are correct, the reduction is called the Windfall Elimination Provision, WEP.

So for the person who worked 20 years in the UK and 20 years in the US, the US SS would be reduced. However, if you work for 30 years in the US WEP does not apply. Also WEP does not apply if the non-SS pension is from voluntary payments ie not connected with employment overseas.

I my case I have made 30 years of voluntary UK NI payments and will get full UK state pension when I turn 66. I also have 17 years of US SS payments. My UK NI pension will not affect my US SS pension as it is from voluntary payments. However, I will be WEPed because I have worked for the past 8 years for a US state that has opted out of SS and I will receive a pension from that state when I retire.

 

[MichaelB]

I have friends that are collecting US SS and pensions in other countries and their SS is not offset by WEP. This seems to mean they are not reporting their foreign pensions.

 

[nun]

I have friends that are collecting US SS and pensions in other countries and their SS is not offset by WEP. This seems to mean they are not reporting their foreign pensions.

That might be the case. You must report any pensions due to non-SS wages to the SSA so they can see if WEP is required. However, your friends will be entitled to full SS even with pensions derived from non-SS wages if they have at least 30 years of SS payments. Of course US citizens and US residents must enter foreign pensions on their 1040.

 

[MichaelB]

That might be the case. You must report any pensions due to non-SS wages to the SSA so they can see if WEP is required. However, your friends will be entitled to full SS even with pensions derived from non-SS wages if they have at least 30 years of SS payments. Of course US citizens and US residents must enter foreign pensions on their 1040.

Thanks for this info. I just read the SS pub on WEP and learned something new. A bit of a bummer for folks that have a small foreign pension and now a reduced SS as well.

 

[nun]

Thanks for this info. I just read the SS pub on WEP and learned something new. A bit of a bummer for folks that have a small foreign pension and now a reduced SS as well.

The amount of WEP is in part based on the size of your non-SS pension. It's done so that the calculation of your SS is adjusted to account for the smaller number of SS contributions rather than erroneously using your lower than appropriate average contribution amounts. The current maximum amount of WEP is $386/month.

 

[MichaelB]

The amount of WEP is in part based on the size of your non-SS pension. It's done so that the calculation of your SS is adjusted to account for the smaller number of SS contributions rather than erroneously using your lower than appropriate average contribution amounts. The current maximum amount of WEP is $386/month.

Thanks. I found a chart (here) and calculator (here) at the SSA website. This is one of those few moments when not having a company pension and having a small SS payment isn't all that bad.

 

[brett]

A friend of mine, until very recently had dual US and Canadian citizenship. He has lived in Canada for a long time, married, etc.

He recently went through the process of renouncing his US citizenship for tax reasons. He tells me that this is not an unusual occourance. The room at the US embassy where those who were renouncing was apparently SRO. He would have preferred to keep his dual citizenship but just did not want to file and pay the tax.

 

[nun]

A friend of mine, until very recently had dual US and Canadian citizenship. He has lived in Canada for a long time, married, etc.

He recently went through the process of renouncing his US citizenship for tax reasons. He tells me that this is not an unusual occourance. The room at the US embassy where those who were renouncing was apparently SRO. He would have preferred to keep his dual citizenship but just did not want to file and pay the tax.

It's generally not the amount of tax to be paid that's the issue as tax credits usually cover any US tax due from a US citizen living overseas. The reasons to renounce are the complexity of the US tax code, the restrictions the US places on certain foreign investments and the fines imposed by the IRS for incorrect filing.

 

[ShokWaveRider]

In our case we have Tri-citizenship EU, USA and Canadian. By far the best benefit is having access to a decent single payer style medical system. So when this one (US) finally breaks for good, we still have something to fall back on even if the winters suck. (BTW When both of us cannot work is when it will break for us as both of us are uninsurable without working, but wait we are basically healthy, though still uninsurable, go figure.) I personally have experience all 3 systems, my wife with 2, with hospital stays of one type or another and general care, (Rough School Years what can I say) The Canadian System wins hands down, and it works, at least IMHO and experience. Oh! and it has absolutely Zero to do with quality of care.

What has this got to do with fire and money? How much does health care cost in retirement, when you have pre-existing conditions?

 

[Alan]

That might be the case. You must report any pensions due to non-SS wages to the SSA so they can see if WEP is required. However, your friends will be entitled to full SS even with pensions derived from non-SS wages if they have at least 30 years of SS payments. Of course US citizens and US residents must enter foreign pensions on their 1040.

Thanks for this info. I just read the SS pub on WEP and learned something new. A bit of a bummer for folks that have a small foreign pension and now a reduced SS as well.

Thanks. I found a chart (here) and calculator (here) at the SSA website. This is one of those few moments when not having a company pension and having a small SS payment isn't all that bad.

Thanks for the info guys. I guess once I start drawing SS I will lose some of it to WEP as I am currently drawing a small UK private pension now (£220/month) and will start drawing a larger one (~£500/month) at 65.

C'est la vie

 

[theOAP]

Some comments:

If you are already a confirmed dual citizen,...great. If you're not, be aware that in most advanced countries (particularly advanced EU countries), obtaining citizenship, or simply moving to the country, is becoming very difficult. In the UK, for example, even the non-UK spouse and children of UK Citizens are now 'means tested' (projected income levels) before they're allowed to come and live in the UK. This is causing a great upset for some not already in the UK. A non-UK spouse, but resident in the UK, does not automatically gain UK Citizenship by marriage, and is the same in many other EU countries. Immigration issues are not limited to the US.

As you've discovered, foreign social security payments (as well as foreign pensions) are subject to WEP. Since Social Security is my only US source income (other than tiny interest payments), I've been WEPed up one side and down the other.

You can receive social security payments from 2 different countries at the same time. In fact, if you qualify for US SS, but have insufficient contributions to a second country to qualify for their version of SS, you may still be able to receive payments from both. This may come about as a result of a 'Totalisation agreement' with the second country. Google is your friend! It's not limited to the US, as other countries can also have totalisation agreements among themselves (particularly EU countries).

A spouse of an SS recipient (US, or other country version, and resident in the US or another country) may also be entitled to reduced SS payments (from the US or the other country) even if they never worked or lived in whichever particular country, and is based on the payments due the husband/wife.

Totalisation agreements and Social Security rules vary greatly from country to country. If you believe any of the above may apply to you, do some research! It may well be worth it. It certainly was for my spouse. And a cautionary word: from related stories, a local SS office in a small town in the US (or even a larger one) may not know all the aspects of this. If you are a citizen of a foreign country, or have worked abroad at some point in your career, here’s somewhere to start:

International Programs - U.S. International Social Security Agreements

 

[ShokWaveRider]

I am British and the whole world would have to be falling over on this side of the pond for me to even remotely consider the UK as a retirement spot. I would rather go to China. Perhaps when the Hell Freezes over and the Devil learns to Ice skate. . All I miss is the Beer!

 

[nun]

I am British and the whole world would have to be falling over on this side of the pond for me to even remotely consider the UK as a retirement spot. I would rather go to China. Perhaps when the Hell Freezes over and the Devil learns to Ice skate. . All I miss is the Beer!

Tsingtao is ok on a warm day.

 

[nun]

A spouse of an SS recipient (US, or other country version, and resident in the US or another country) may also be entitled to reduced SS payments (from the US or the other country) even if they never worked or lived in whichever particular country, and is based on the payments due the husband/wife.

Good point. Many people who have spouses who receive a SS pension but are not citizens of their spouse's country and haven't contributed to that SS system are still entitled to survivor's benefits on the death of the spouse.

 

[Nemo2]

I am British and the whole world would have to be falling over on this side of the pond for me to even remotely consider the UK as a retirement spot. I would rather go to China. Perhaps when the Hell Freezes over and the Devil learns to Ice skate. . All I miss is the Beer!

+1 (Apart from the warm beer, that is).

Having been born in England, and having lived there until my teens, I presume I have dual UK/Canadian citizenship..........however, I travel on a Canadian passport, (I am a Canadian), and cannot envision a situation wherein I'd attempt/want to claim UK citizenship.

(I also, in my late teens-early twenties, was eligible to apply for Australian citizenship......but that boat has sailed.....not that I wish I had boarded it.)

 

[nun]

+1 (Apart from the warm beer, that is).

Having been born in England, and having lived there until my teens, I presume I have dual UK/Canadian citizenship..........however, I travel on a Canadian passport, (I am a Canadian), and cannot envision a situation wherein I'd attempt/want to claim UK citizenship.

(I also, in my late teens-early twenties, was eligible to apply for Australian citizenship......but that boat has sailed.....not that I wish I had boarded it.)

It's interesting how much where you retire is decided by practicalities and how much by sentiment. I too was born in the UK and acquired US citizenship after having a GC for 10 years. I would never describe myself as American, I took US citizenship so I could vote and to protect my SS and medicare benefits as much as possible. I'll retire to the UK as it is less expensive for me to live there than in the US, my family is there, and I miss the English zeitgeist. Beer isn't a factor as I can get great beer in the US.

 

[Nemo2]

It's interesting how much where you retire is decided by practicalities and how much by sentiment.

For me it is/was a combination of both, and with the weighting of both tilted in favor of Canada..........I came to Canada from Australia in 1965, stayed a year, traveled around the US & Mexico and returned to Australia, where I spent 3 weeks before deciding that Canada was where I 'fit'.

Years ago I had a book of the Herman cartoons by the late Jim Unger, (a Canadian also born in London).......in the intro I recall him saying that, as a kid in England, he felt like a displaced Martian, (or words to that effect), and it summed up my own youthful emotions.......although 'English' by birth and ancestry, I cannot recall a time when I felt like one of 'them', and I couldn't imagine ever going back there.

 

[theOAP]

Sorry, I didn't mean to stir up old deep-seated emotions.

I am British and the whole world would have to be falling over on this side of the pond for me to even remotely consider the UK as a retirement spot. I would rather go to China. Perhaps when the Hell Freezes over and the Devil learns to Ice skate. . All I miss is the Beer!

We're very sorry to hear of your reluctance to return to the UK. You will be missed. The great British art of whinging has undoubtedly suffered greatly since your departure. (but the art of taking the pi** still flourishes)

There have been several comments in the thread related to immigating back to an old country with a US (or other) spouse, as well as various comments on cross boarder SS. Some need to be reviewed. For example, this previous post:

Originally Posted by Alan:
"DW is not eligible to her own UK SS because she didn't work and pay into the UK system long enough. She left work 4 years after graduation when we had our first child, and by the time the younger of the 2 was 4 yrs old we had moved to the US. She will be getting US SS because she paid into it for 18 years."

If DW paid UK National Insurance contributions during those 4 years of employment in the UK, and due to her 18 years of SS contributions in the US, she IS entitled to a reduced UK State pension thanks to the Totalisation agreement between the US and the UK, even though she would normally not qualify under UK rules. But, if she were to go this route, her US SS would be WEPed. (It's time to do the math.) The same applies to the other 24 countries the US has an agreement with, as well as agreements that may exist between other countries.

I've yet to find another country that applies 'WEP' as the US does (and I may be wrong about this). I do know for a fact that State pensions from the EU are not reduced due to entitlements from US SS, or another country.

It will not be enough to make the monthly payments on a new Rolls Royce, but it may pay the CableTV bill. This applies equally to those who may be waiting for the Devil to master ice skating. Intentions are not a factor, just the employment/contribution history.