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Social Security Benefits as an American Living Abroad: Everything You Need to Know

Social Security Benefits as an American Living Abroad: Everything You Need to Know
Ines Zemelman, EA
15 February 2022

Social Security Benefits for expats

Knowing the details of your Social Security status is a vital part of planning your retirement. You’ve been contributing to your Social Security for the entire time you’ve been working and now you decide that you’re going to retire in a foreign country. A typical question in this situation is: “What will happen to my Social Security benefits when I retire abroad?” In this piece, we will take a look at how you will qualify to receive Social Security benefits, how your US expat taxes will be affected and whether or not you will be able to receive benefits overseas. 

How Do I Qualify for Social Security Benefits abroad?

While you are working and making Social Security contributions, you earn credits toward your Social Security benefits. The amount of credits you need to receive retirement benefits depends on the year in which you were born. For those born in 1929 or at a later time, 40 credits are required. This is equal to 10 years of working. If you become unemployed or you move abroad and stop making Social Security contributions before earning enough credits to receive benefits once you retire, the credits you earned up to that point will remain intact on the record of your Social Security. If you made Social Security contributions both to a foreign country and the United States, you may not qualify because you have not worked for a long enough period or you didn’t work recently enough to have met the minimum eligibility requirements.

Why Do the United States and Foreign Countries Have Bilateral Social Security Agreements?

Social Security agreements – or Totalization Agreements – are in place to protect taxpayers from making Social Security contributions to two countries. If you work in a country that doesn’t have an active Social Security agreement with the United States, you are most likely going to be required to pay Social Security taxes in both countries.

If you are self-employed, you will generally be required to pay into the United States Social Security system. Social Security taxes are included in the self-employment taxes you pay. These taxes can be up to 15.3% of your net business income. This rate includes 12.4 for social security (OASDI) and 2.9% for medicare (hospital insurance). As a self-employed American Expat, you may also be subject to Social Security taxation in your host country if there is not a Social Security agreement in place. There is currently no tax relief made available by the IRS for Social Security taxes paid to a foreign country. There are countries, though (like Mexico), in which foreign Social Security contributions are regarded as an income tax and are therefore deductible.

For countries in which there is an active Totalization Agreement with the United States, a self-employed individual who is subject to a foreign self-employment tax will be exempt from a self-employment tax in the US. In order to prove that you are participating in a foreign Social Security program, you will be required to obtain a certificate of coverage from your country of residence. If you are self-employed and paying into a foreign Social Security program, you should still file Schedule SE with your US expat tax return with an attached statement that you are exempt from US expat taxes as mandated by the Social Security agreement between the United States and your host country.

Totalization Agreements also offers comprehensive benefit protection for workers who have decided to divide their employment between a foreign country and the United States. These agreements generally cover both self-employed individuals and employees of foreign establishments. The rules of the agreement may qualify you for partial foreign or US benefits on combined Social Security contribution credits from both the United States and your country of residence. If you have a portion of the Social Security credits which will allow you to draw Social Security benefits but you don’t have them all, the SSA (Social Security Administration) will take into consideration the amount of credits you earned while making Social Security contributions to a foreign country. Conversely, the foreign country in which you are residing will take into consideration the amount of credits you earned in the United States and apply those credits to your Social Security benefits.

If your combined credits between the United States and your host country make you eligible to receive Social Security benefits, you will receive partial benefits based on the percentage of your career you’ve spent paying into each country. The Social Security agreements enable the SSA to totalize foreign and United States coverage credits if you have earned at least six quarters’ worth of US credits. Your host country may also have similar minimum coverage amounts in order to receive foreign Social Security benefits.

In Which Countries Are There Active Totalization Agreements with the United States?

There are currently 30 countries with active Totalization Agreements with the US. There is a full list of countries with Social Security agreements on the SSA website.

Can US citizens living abroad receive social security?

Even if you aren’t living in the United States, you are still eligible to receive Social Security distributions. The amount of benefit will depend on several factors such as work and earning history, birth year, and age when you start to claim social security.  Social security benefits include monthly retirement, survivor, and disability benefits. They don’t include Supplemental Security Income (SSI) payments, which aren’t taxable. 

Can You Live Outside the US and Collect Social Security

In case of US citizens, as long as you are eligible, you may be able to collect social security payments outside the United States.  There are some exceptions for those retirees who are living in certain countries. The Social Security Administration is strictly prohibited from sending payments to North Korea and Cuba. If you are residing in one of these countries, you will receive all withheld payments when you move back to the United States or to a country where there are no restrictions. If you are a non-US Citizen, you will not be eligible to receive withheld payments for the months in which you lived in North Korea or Cuba. This is true even if you move to another country in which Social Security payments are allowed or to the United States.

In addition to the prohibited payments to North Korea and Cuba, the SSA cannot generally send Social Security payments to any of the following countries:

  • Azerbaijan
  • Belarus
  • Georgia
  • Kazakhstan
  • Kyrgyzstan
  • Moldova
  • Tajikistan
  • Turkmenistan
  • Ukraine
  • Uzbekistan
  • Vietnam

Another important thing to note is that the SSA is not allowed to send your payments to any other person besides you. There are some exceptions to this rule.  In order to take advantage of the exceptions, you are required to agree with payment conditions. This includes showing up at the US Embassy every month to personally pick up your benefit check.

What Does It Mean to Be Outside of the United States?

You are outside of the United States if you are not living in one of the 50 states, American Samoa, Guam, Puerto Rico, the District of Columbia, the Northern Mariana Islands, or the US Virgin Islands. You may also be considered to be outside of the United States and receive Social Security payments in another country if you have been living outside of the US for at least 30 days.

What Do I Need to do to Protect My Right to Social Security Benefits?

While you are living outside of the United States, the Social Security Administration will periodically send out a questionnaire on which you will report updated information. The SSA uses your answers to determine whether or not you remain eligible for benefits. You must return the questionnaire to the office from which it was received as promptly as possible to avoid having your benefits suspended. You are also required to notify the SSA of any changes which would affect your Social Security payments. If you do not report updated information or you report false information, you are subject to penalization in the form of a fine or imprisonment. You may also wind up losing some of your Social Security benefits.

Can Expatriates collect Social Security Benefits via Direct Deposit to My Host Country?

There is a complete list of countries in which direct deposit is available on the SSA website. Direct deposit is actually recommended so that you receive your benefits in a timely manner.

How Will My Social Security Payments be Taxed?

If you have US Citizenship or US Residency, taxes on up to 85% of your benefits may be taxed on a federal level. The amount that’s taxed will depend on the total amount of your Social Security payments. The SSA may also take into consideration your other income (if you have any). Generally speaking, the more you make the more you will be taxed.

If you are an individual earning an income of $25K or more, 50% of your Social Security benefits will be subject to federal income tax. A total taxation rate of 85% may be imposed if you are in either of the following situations:

The total of half of your Social Security benefits and your other earned income is more than $34K ($44 for married couples filing a joint return)

You are a married couple filing a separate return and you lived with your spouse at any point during the year.

Keep in mind that there are many foreign countries in which US Social Security benefits are taxed, so it is suggested that you review your host country’s tax laws to keep from being surprised with more taxes than you had anticipated.

What Happens to My Social Security Benefits if I am Not a US Citizen?

If you are a citizen of any of the 30 countries in which there is an active Totalization Agreement with the United States, you will continue to receive your Social Security benefits as long as you remain eligible. You may also receive payments if you are a citizen of one of the eligible countries posted on SSA. In order to receive payments as a citizen of the countries noted in the provided link, you need to be outside of the US and you must not be receiving Social Security distributions as a dependent or survivor. If you are not a citizen of one of the countries listed above or you are not a US Citizen, the Social Security Administration will stop sending your payments after you have lived outside of the United States for six calendar months. This is true unless you fall under one of the following exceptions:

  • You became eligible for monthly Social Security payments before December 1956
  • You are an active member of the US Military or Naval Service
  • The employee on the record of the benefits you receive was part of a railroad working program which was treated as covered employment by the SSA
  • The employee on the record of the benefits you receive became deceased while serving in the US Military or died as a direct result of a disability that was connected to his/her service and did not have a dishonorable discharge.

Once Social Security payments have ceased, the SSA will not resume payments until you are back in the United States and stay for a full calendar month. In order to qualify as being in the US for a full calendar month, you are required to be in the United States on the first minute of the month and remain in the United States until the final minute on the final day of the month. The Social Security Administration may also ask for proof that you have maintained lawful presence in the US for the full calendar month. For this reason, it’s imperative that you keep meticulous records of your time in the United States. 

What if I am Receiving Dependent or Survivor Benefits?

If you are a dependent or a survivor and you are receiving Social Security benefits, you are subject to special circumstances and a residency requirement. If you are not a citizen of the United States, you must have resided in the United States for at least five years. Throughout the five year period you lived in the United States, the family relationship on which benefits are based must have continuously existed for the entire five years. Children may already meet the residency requirement or will be considered by the SSA to have met the requirement if the parent worker meets the requirement. 

Social Security benefits will not be available to children who were adopted from outside of the United States while residing outside of the US. This is true even if the child meets the residency requirement. The residency requirement is not applicable, though, if any of the following conditions are met:

  • You became eligible for monthly benefits before January 1, 1985
  • You are receiving survivor benefits from a worker who became deceased while serving for the US Military or died as a direct result of a disability that was connected to his/her service
  • You are a citizen of one of the countries that are entitled to receive benefits regardless of the amount of time you spend outside of the United States
  • You reside in a country with an active Totalization Agreement with the United States

Is foreign social security taxable in the US

  • Absent application of a particular treaty provision, foreign social security pensions are generally taxed as if they were foreign pensions or foreign annuities. They are not eligible for exclusion from taxable income the way a U.S. social security pension might be unless a tax treaty provides for an exclusion.

  • Most income tax treaties have special rules for social security payments. Generally, U.S. treaties provide that social security payments are taxable by the country making the payments. However, a foreign social security payment may also be taxable in the United States if you are a U.S. citizen or resident, as a result of the saving clause. And remember, not all treaties have the same provisions for foreign social security pensions, so always refer to the specific treaty at issue.

Expat Social Security Tax and Medicare Tax

Generally, an expat is required to pay U.S. social security and Medicare taxes for the wages earned as an employee outside United States if one of the following applies:

  • You work for an American employer which includes the U.S. Government, individual who is a US resident, a partnership of which at least two-thirds of the partners are U.S. residents, a trust in which all the trustees are US residents, a corporation organized under the laws of United States
  • You perform the services in connection with an American vessel or aircraft either by entering into employment contract within the United States or the vessel or aircraft touches U.S. port while you are employed on it
  • You are working in one of the with which the United States has entered into a totalization agreement
  • You are working for a foreign affiliate of an American employer under a voluntary agreement between the American employer and the U.S. Treasury Department.

Do expats pay Medicare tax?

All US expats who earn income from wages in the united states are required to pay medicare taxes for a total of 2.9% which includes 1.45% for employer and 1.45% for the employee.  There is no wage base limit for medicare tax, however, an additional tax is calculated once the employee earns a certain amount

Do expats pay social security tax?

Same as the medicare tax, all US expats are required to pay social security taxes which consist of a total of 12.4% (6.2% for the employer and 6.2% for the employee).   For 2022, the wage base limit is $147,000.

Both social security tax and medicare tax are payroll tax known as FICA (Federal Insurance Contributions Act) and both employees and employers are responsible for paying.  In the case of Self-employment, there is no employer to contribute towards FICA taxes, instead, you must pay both employer and employee portion on your income over $400 for a total of 15.3% and can deduct one-half of the self-employment taxes on your personal tax return.

Foreign Earned Income Social Security

Pension or annuity payments including social security benefits does not qualify for foreign earned income exclusion (Sec 911) 

Related Posts:

  1. Social Security Taxes and Americans Living Overseas
  2. Guide to Bilateral Social Security Agreements for American Expats
  3. Social Security Spousal Benefits for American Expats with a Foreign Spouse
Ines Zemelman, EA
Founder of TFX