American Soc Sec and Foreign Income

[RC408]

I searched forums and Google but can't get a clear answer.

 

I am hoping someone is in this situation and can give me a bit of information.  I am in my early 50's so I am not anywhere near Social Security age.  I am assessing whether to take a job from a foreign company without a Social Security agreement with the US and then move to Thailand under a Retirement Visa.  If I do so I want to know how that will affect my US Social Security payouts when I am of age.  I already have my 40 quarters of work to qualify for US Social Security.  Will the multi-year break of US income affect my payout?  If so how is that calculated?

 

Anyone with a similar experience that can give me a general idea of their experience would be appreciated.  And yes, I will talk to a specialist eventually but am in the information gathering phase.  Thank you!

[Havefunme]

Go to my social security and sign up that will tell you your status 6yrs ago I hint my number to collect. ( at age 54) and then  switched company to a non American I haven't filed taxes in 3 yrs because I don't owe money and on my social security says I'm still eligible to collect I'm in 6 months of retirement now living in Thailand I start collecting in January when I reach 62

[Why Me]

5 hours ago, RC408 said:

Will the multi-year break of US income affect my payout?

Nope. I was in similar situation. Quit a US job to take one here which obviously doesn't pay US SS. SS payout is calculated on your total contributions until you start collecting. 

 

So a break will not affect your payout other than that you aren't contributing anymore (like being unemployed as far as they are concerned). Like the guy above says just sign up for MySocialSecurity and it'll project what you can expect monthly based on the age you start drawing.

[Damrongsak]

As far as I understand it, your payout will depend on your pay-in over the years.  That's only fair.  If you have your 40 quarters you're eligible.  However, if you work for a foreign company and don't pay in, it doesn't count.  So you get less in the end. But what do I know?  Just been paying into the system for a bit shy of 40 years.

[bwpage3]

I does affect the amount you will receive each month.

 

You might be earning the max of your career right now.

[cmarshall]

It certainly does affect your payout which will be less than it would be if you continued to pay into SS.  SS takes your best 40 quarters to calculate your benefit.  Probably you have some quarters in there where you worked in a restaurant as a teenager with very low pay.  By continuing to work at a job that in the latter part of your career when your pay level is probably the highest in your life your benefit will increase.

 

When the posters above opine that opting out of the payroll tax at this point will not reduce your benefits they are correct in that doing so would not reduce the benefit for which you qualify today.  However, you would forego the additional benefit you would be continuing to contribute to the system.  

 

But the right way to approach this question is to run software that lets you model the results under varying scenarios, rather than judging by the seat of your pants with a correspondingly large error range.  The Economist Lawrence Kotlikoff offers software to do these kinds of calculations.  

 

https://maximizemysocialsecurity.com/

 

I haven't used this software, but I have used extensively his financial planning software, which I also recommend, Esplanner from esplanner.com.  Esplanner models everything: taxes, inflation, investment returns, change of residence, IRAs and much more.  It also calculates Social Security, but it doesn't allow you to model earned income not subject to the payroll tax.  I don't know if the software at the link above does, but you could email Kotlikoff to pose that question.

 

There are other sources that provide similar software or consulting services to answer such questions.  It's a big decision to forego the increased benefit since for most people SS is the only asset they will have which they can't outlive.

[1FinickyOne]

I think if you call SS they will tell you how much you will receive... maybe not including COLA adjustments... though I am not sure if available at your age.. 

[taxout]

If your new job outside the U.S. qualifies you for some type of pension payment, then it WILL affect your Social Security. This is a somewhat complicated area called the Windfall Elimination Provision, but read here:

 

https://www.ssa.gov/pubs/EN-05-10045.pdf

[bkk6060]

1 hour ago, Havefunme said:

I haven't filed taxes in 3 yrs because I don't owe money

My understanding is it does not matter.

If you are a US citizen working outside the US, you still need to be filing a tax return each year even if your income is within the exempt amount.

 

[Langsuan Man]

When people quote quarters when talking about US Social Security, the quarters are just the number required to obtain the minimum amount of Social Security payout.  How much you receive is dependent upon your lifetime earnings, from which Social Security contributions were paid

 

So if the OP is planning on working for a foreign company from now until he is eligible for full Social Security then he will receive only the estimated amount on his current Annual Social Security Statement 

[cmarshall]

1 hour ago, Langsuan Man said:

When people quote quarters when talking about US Social Security, the quarters are just the number required to obtain the minimum amount of Social Security payout.  How much you receive is dependent upon your lifetime earnings, from which Social Security contributions were paid

 

So if the OP is planning on working for a foreign company from now until he is eligible for full Social Security then he will receive only the estimated amount on his current Annual Social Security Statement 

Actually, the estimated amount on the Annual Social Security Statement assumes that your current earnings continue until Full Retirement Age.  So, if he were to escape payroll taxes now, his SS benefit when he retires would be less than the current estimate on the Statement, except to the degree that Cost of Living Adjustments increased it in the interim.

[RC408]

Thank you everyone for your replies.  I will take time tomorrow to re-read them all and visit the links and other recommendations for further information.  

 

The move may still make sense calculating loss of increased SS payments vs lower cost of living.  This means the amount I may be able to save for retirement may be greater than the increase in SS payments I would receive by continuing to work in the US.  In addition I will be living the life I want to live rather than working towards that life some date in the future.

[cmarshall]

2 hours ago, RC408 said:

Thank you everyone for your replies.  I will take time tomorrow to re-read them all and visit the links and other recommendations for further information.  

 

The move may still make sense calculating loss of increased SS payments vs lower cost of living.  This means the amount I may be able to save for retirement may be greater than the increase in SS payments I would receive by continuing to work in the US.  In addition I will be living the life I want to live rather than working towards that life some date in the future.

You should use appropriate software tools to estimate the outcome, but I think your reasoning succumbs to excess self-confidence characteristic of inexperienced investors.   It is very unlikely that you will be able to invest the what you save in payroll taxes to provide yourself with an equivalent income for the rest of your life.  Naive investors don't appreciate that a life annuity such as SS is the only asset that you can't outlive, very much unlike whatever portfolio you can assemble.

 

But optimism springs eternal and people make poor choices whenever they get the chance.

[Pib]

2 hours ago, RC408 said:

Thank you everyone for your replies.  I will take time tomorrow to re-read them all and visit the links and other recommendations for further information.  

 

The move may still make sense calculating loss of increased SS payments vs lower cost of living.  This means the amount I may be able to save for retirement may be greater than the increase in SS payments I would receive by continuing to work in the US.  In addition I will be living the life I want to live rather than working towards that life some date in the future.

 

Be sure to research the Windfall Elimination Provision of SS benefits.

https://www.greenbacktaxservices.com/blog/retirement-expat-tax-advice-foreign-pension-social-security-benefits/

 

Googling along the lines of "SSA POMS Windfall Elimination" will bring an array of SSA regulations (which they call POMS) regarding the subject.  It can be very complicated. 

 

 

Windfall Elimination Provision

[taxout]

Is that the same Windfall Elimination Provision I mentioned in my post right above?

 

Trying to read POMS and work anything out is almost impossible unless you've worked at Social Security for a decade or more. Best to just accept that if you work overseas in a job not covered by Social Security and get a pension from that work, then your Social Security payments will be cut somewhat. The amount of the cut will be whatever the computers say it will be.

[RC408]

UPDATE: The SS planner allows you to enter any age you wish to stop working and your annual pay estimation up to that point.  I calculated my current benefit by entering data a if I am stopping work this year and got my base payout.  I was then able to play with the calculator assuming I stop US income at 55, 60, etc. assuming current annual income.  This is valuable information for me to make an informed decision.  This is only one part of the decision process so I will continue the journey.

 

cmarshall- Thank you for the links, I am going to play with them today.

Everyone else- I appreciate your comments and suggestions.  Great group here!

[RC408]

9 hours ago, cmarshall said:

You should use appropriate software tools to estimate the outcome, but I think your reasoning succumbs to excess self-confidence characteristic of inexperienced investors.   It is very unlikely that you will be able to invest the what you save in payroll taxes to provide yourself with an equivalent income for the rest of your life.  Naive investors don't appreciate that a life annuity such as SS is the only asset that you can't outlive, very much unlike whatever portfolio you can assemble.

 

But optimism springs eternal and people make poor choices whenever they get the chance.

I am taking this into account and not assuming the best outcome, or even a good one.  If I can live and work where I am happy at an acceptable loss of SS income per month it may be worth it to me. 

 

I feel bad for people who wait until they are too old to climb the mountain to go to the mountain.  Seeing it out of the window of a tour bus isn't for me.

[Langsuan Man]

I think that the OP should also include into his planning the cost of private insurance versus US Medicare if he should return to the US later on in life

 

No matter what he will receive Part A Medicare automatically when he turns 65.  The problem is that he will either have to have part B (with it's 10% penalty per year if not obtained @ 65) or a private insurance to pay for the many things part A does not cover

 

Retirement planning is not just about income  

[taxout]

You receive Part A automatically if you're already receiving Social Security benefits. Otherwise, you have to sign up for it.

 

https://www.medicare.gov/sign-up-change-plans/how-do-i-get-parts-a-b

 

The main problem with waiting to enroll in Part B isn't just the penalty. There's a waiting period as well before your coverage takes effect, which could be over a year depending on precisely when you enroll.

 

Note that Part A covers surprisingly little: the real coverage is in Part B. If you have surgery in a hospital, for example, the surgeon's bill comes under Part B not Part A.

 

I'd be very very surprised if there's any private insurance out there that comes close to the coverage and costs of Part B, even with years of penalties.

[Pib]

 

3 hours ago, Langsuan Man said:

Retirement planning is not just about income  

Amen Brother!!!

[flexomike]

23 hours ago, RC408 said:

Thank you everyone for your replies.  I will take time tomorrow to re-read them all and visit the links and other recommendations for further information.  

 

The move may still make sense calculating loss of increased SS payments vs lower cost of living.  This means the amount I may be able to save for retirement may be greater than the increase in SS payments I would receive by continuing to work in the US.  In addition I will be living the life I want to live rather than working towards that life some date in the future.

Just a side note, if you are planning on working in Thailand you can not do that on a Retirement Visa

 

[RC408]

10 hours ago, flexomike said:

Just a side note, if you are planning on working in Thailand you can not do that on a Retirement Visa

 

This raises a good question.  How does it work if one wants to continue being productive through their 'retirement' while living in Thailand?  Private replies appreciated. 

 

If I hijacked my own thread I apologize.  I will Google this info in the Forum as well.

Edited May 18, 2020 by RC408

[RC408]

14 hours ago, Langsuan Man said:

Retirement planning is not just about income  

Thank you!  I agree wholeheartedly which is why I am on this journey now instead of 1 month before I dive in.  I am taking years to gather info, plan, and execute this.  In the meantime I will come for a few months every year as a long stay tourist.

[cmarshall]

8 hours ago, RC408 said:

This raises a good question.  How does it work if one wants to continue being productive through their 'retirement' while living in Thailand?  Private replies appreciated. 

 

If I hijacked my own thread I apologize.  I will Google this info in the Forum as well.

On a retirement visa it doesn't work.  You can't even do unpaid volunteer work without a work permit.  Work permits are not available for those on a non-immigrant O retirement visa.  If you had a non-immigrant O because of marriage a Thai woman, then you could get a work permit.

 

Think "hobbies" instead.

[Langsuan Man]

One other wrinkle in the connection between Social Security and Medicare is that when Congress changed the "full" retirement age from 65 to a spread of 66, 67, and 68 depending upon which year you were born.   They did not change the eligibility date for Medicare to coincide with this Social Security change so even if you started receiving SS at 66 or later, your Medicare Part B "countdown clock" starts at 65

 

It is a real PITA to have to pay Medicare Part B premiums directly and quarterly, if you are waiting for full social security, since it cannot be deducted from you Social Security check.  So you must make a special payments via EFTS directly to Medicare

 

I was lucky I only had to pay it for one year before it started being deducted from my SS check, but is one more thing to consider    

[taxout]

Actually, paying Medicare Part B online through my bank's bill-paying service is not a big deal. The problem is figuring out how much to pay and when, since bills for Part B don't seem to arrive unless you're very delinquent, so you always have to guess a bit about timing and amount. Guess wrong and underpay and you will finally get a bill.

Edited May 19, 2020 by taxout

[cmarshall]

1 hour ago, taxout said:

Actually, paying Medicare Part B online through my bank's bill-paying service is not a big deal. The problem is figuring out how much to pay and when, since bills for Part B don't seem to arrive unless you're very delinquent, so you always have to guess a bit about timing and amount. Guess wrong and underpay and you will finally get a bill.

I signed up for Part B at 65, but did not start collecting SS benefits until age 70.  It was no problem.  Medicare transferred the monthly premium out of my US checking account every month automatically.  I don't remember exactly how I set that up, but it was not done through the bill pay feature of the bank account.  I probably set it up in my account at medicare.gov.  Whenever they raised the Part B premium, the amount withdrawn would automatically be adjusted.  When I started receiving my SS benefits, the withdrawals stopped automatically and the SS benefit amount was reduced accordingly.

Edited May 19, 2020 by cmarshall