Us Social Security Work Credits And Working Lt In Thailand

[Jingthing]

For a US citizen to collect social security retirement benefits upon old age, they are required to have earned a minimum of work credits during their working life. I think that some countries may have sharing agreements with the US, for example if you worked for 20 years in France and paid into their system, this could be applied to the US system (or so I think I have heard).

What about Thailand? What if a US person worked 20 years in Thailand and hadn't worked enough work credits in the US to be eligible? Does that mean such a person when reaching old age is SOL with the US system or do you pay into the system when you file US tax returns?

Just curious about this spurred by another thread. Situation does not apply to me.

[PeaceBlondie]

Jingthing, I am not an SSA expert, but I am not aware that work in Thailand qualifies for FICA. It does qualify for SECA, self employment tax. So, you can claim you earned X amount each year while being self employed each year, exempt it from income tax, and pay about 15% social security tax on it, under SECA. That would get you the 40 quarters, but at a very low rate of earnings, probably.

Keep in mind that after a worker completes 40 quarters of qualifying employment (and SSA has a funny way of counting quarters), the actual old age pension is computed on 35 highest annual years of earnings, adjusted for inflation. Thus, a worker retiring today might qualify based on a 35 year collection that includes a dollar-per-hour job that he earned part time while in high school. You can earn a pension based on monthly average wages of $50, and receive 45 dollars pension monthly.

"For 2009, workers generally receive one credit for each $1,090 of earnings. For 2008, the amount of earnings for one credit was $1050. A worker can receive a maximum of four credits for any year.

Before Social Security credits can be earned for any year, a self-employed person usually has to have net earnings of at least $400. However, a person with actual net earnings from self-employment of less than $400 may still receive credits for years in which he or she uses the "optional method" of reporting earnings."

[thaihome]

Some expats working in Thailand (and other countries as well) work for FICA US companies, therefore all earnings are reported to SSA. Of course, the disadvantage is FICA is deducted from your pay each month, which is calculated based on entire pay, including allowances.

TH

[Jingthing]

So the bottom line is that you worked as an English teacher here for a typical Thai school, for example, and only paid the standard Thai taxes, even if you also filed US taxes, you would not be earning SS work credits, correct?

Edited November 5, 2008 by Jingthing

[lanny]

You receive Social Security credits for work in Thailand in specific circumstances: If you work for a US company your income is reported on Form W-2 and FICA taxes are withheld; If you work for yourself (are self-employed) you pay the self-employment tax when you file your US tax return. If you work for a Thai company, or any other non-US employer, your earnings are generally not subject to US social security taxes. The rule is that you are subject to the US tax if you entered in to your employment agreement in the US; if you entered the agreement outside the US, the earnings are not subject to the tax. In the event that you are covered, you pay the tax with your tax return, just as if you were self-employed. I don't know how this rule is enforced; I've never seen anyone admit they entered a contract in the US.

Once you reach the minimum 40 credits, it does not make sense to continue to contribute to the social security system if you are not required to. Long-term, you can make better returns investing on your own. It can make sense to stay in the system if you have not attained the necessary 40 credits; however, once you start you have to continue indefinitely.

[Pib]

So the bottom line is that you worked as an English teacher here for a typical Thai school, for example, and only paid the standard Thai taxes, even if you also filed US taxes, you would not be earning SS work credits, correct?

If you ain't paying Uncle Sam SS deductions, then he's not giving you SS work credits.

[JimGant]

for example if you worked for 20 years in France and paid into their system, this could be applied to the US system (or so I think I have heard).

Actually, the reverse could happen, per the "windfall elimination provision," should you subsequently get a pension from that French job. The following from the SSA website:

If you work for an employer who does not withhold Social Security taxes from your salary, such as a government agency or an employer in another country, the pension you get based on that work may reduce your Social Security benefits.

The above is designed to prevent someone from contributing to SS the bare minimum 40 quarters, then switching to a job that does not pay into SS, but which eventually results in a pension. The "windfall" being that, SS payouts are extremely front-loaded, i.e., for each dollar that's paid in during the first 40 quarters, the actuarily average Joe will get several dollars back when he finally starts collecting. But, the longer he pays in, the less he'll get back for each of those subsequent payments.

(This windfall provision phases out between 40 quarters and 120 quarters of banked SS earnings.)

Not exactly on-subject. But an interesting point to ponder for some expats expecting to collect full SS benefits........

[Jingthing]

If you work for a Thai company, or any other non-US employer, your earnings are generally not subject to US social security taxes.

Oh, this makes sense to me. Well, at least people should be aware of the consequences of what they are doing. I am not sure what it would mean in the long run. Younger people who are earning enough credits in their 20s, 30s, even 40s are skeptical that there will even be a social security benefits program for them when the time comes.

[chiang mai]

I could use some guidance on this subject also:

I have paid into the US SSc systems for thirteen years and into the UK NI system for seventeen years - the US system requires 40 quarters and the UK system 30 years - I have both a US SSc number and a UK NI number - I am British.

I am now being asked by the UK if I want to make backdated payments to make up the missed years and I am pointing them at the US and telling them they there is a reciprocal agreement in place but they have gone very very quiet. I have also written to the SSc folks in Maryland to inquire what my SSC payment status is, setting out the details above and they don't seem to want to respond either.

Does anyone have any escalation paths for either of these two groups and/or have any first hand experience of anything similar?

[lannarebirth]

Not sure where to put this since the "redistribution of wealth" thread was closed. Kind of an eye opener:

http://www.carolinajournal.com/articles/di...ry.html?id=5081

[Lost in LOS]

Not sure where to put this since the "redistribution of wealth" thread was closed. Kind of an eye opener:

http://www.carolinajournal.com/articles/di...ry.html?id=5081

exactly what i was trying to get across about the new administration. my ira an my ss are suspec,. i am about to collect in april and hopefullywill come in under the wire. I hope it doesn't go the way of the link and yes this is thailand related since we are attempting to live in Thailand on this money. just like the British system threads

[Jingthing]

It may be marginally Thai related but I have been following this issue a bit and I sincerely do not believe they are doing anything more than TALKING about this (government takeover of IRA/401k). I rate the chances of it happening as very small. But you never know. What would shock me less and is more possible, some kind of change around REGULATIONS dealing with IRA/401K, but we are quite a ways from any details about what this may be, so I see little reason to get excited as yet. I do not see how the winners of the recent election can see the result as a mandate for a radical restructure of the IRA/401K system, they would be crazy to try. You may think they are crazy, I don't.

Edited November 7, 2008 by Jingthing

[OriginalPoster]

Not sure where to put this since the "redistribution of wealth" thread was closed. Kind of an eye opener:

http://www.carolinajournal.com/articles/di...ry.html?id=5081

That idea of Guaranteed Retirement Accounts (GRAs) sounds similar to Singapore's Central Provident Fund (CPF) scheme. I don't think that starting up a scheme like that in replace of 401k's for future contributions wouldn't be that scarey of a thing as long as you allowed people who presently have money in 401k's to leave it there if they want to.

[Jingthing]

Not sure where to put this since the "redistribution of wealth" thread was closed. Kind of an eye opener:

http://www.carolinajournal.com/articles/di...ry.html?id=5081

That idea of Guaranteed Retirement Accounts (GRAs) sounds similar to Singapore's Central Provident Fund (CPF) scheme. I don't think that starting up a scheme like that in replace of 401k's for future contributions wouldn't be that scarey of a thing as long as you allowed people who presently have money in 401k's to leave it there if they want to.

That mirrors a thought I had but didn't mention. Maybe they are fixing to offer a CHOICE between going rogue or hitching a government guarantee. Doing much more than that especially to oldies already established in the current system would be political suicide.

Edited November 7, 2008 by Jingthing

[OriginalPoster]

..

Edited November 7, 2008 by OriginalPoster

[lannarebirth]

Not sure where to put this since the "redistribution of wealth" thread was closed. Kind of an eye opener:

http://www.carolinajournal.com/articles/di...ry.html?id=5081

That idea of Guaranteed Retirement Accounts (GRAs) sounds similar to Singapore's Central Provident Fund (CPF) scheme. I don't think that starting up a scheme like that in replace of 401k's for future contributions wouldn't be that scarey of a thing as long as you allowed people who presently have money in 401k's to leave it there if they want to.

Personally, I am against government involvement with all manner of retirement schemes, inclucing Social Security, IRA's, 401K's, and corporate. I DO believe the government should keep it's promises to those already involved in these schemes however.

[zaphodbeeblebrox]

Once you reach the minimum 40 credits, it does not make sense to continue to contribute to the social security system if you are not required to. Long-term, you can make better returns investing on your own. It can make sense to stay in the system if you have not attained the necessary 40 credits; however, once you start you have to continue indefinitely.

Bingo - exactly why it made sense for me to get out. My last 10 years in U.S., I paid the maximum rate. What a scam! I'll be lucky, if I see a dime of it, when I hit retirement age in 20 years.

[OriginalPoster]

Once you reach the minimum 40 credits, it does not make sense to continue to contribute to the social security system if you are not required to. Long-term, you can make better returns investing on your own.

Seems to be very true.

I have the 40 credits already, so just out of curiosity I download the SSA's benefit calculator software from http://www.ssa.gov/OACT/anypia/anypia.html and put my numbers into it and then checked to see what effect on my benefits it would have if I worked next year outside the US and paid nothing into SSA versus worked inside the US and paid the maximum annual amount into SSA (US$6324). Under that scenario the company that I worked for would also be kicking in $6324, making the total contribution $12,648. It looks like paying in that extra $12,648 would cause my benefits to increase by an $300 per year if I started taking payments when I reached 62 years old. Under present rules, that $300 per year would be adjusted for inflation each year, put still it looks much more like a tax than an investment.

Edited November 9, 2008 by OriginalPoster

[lanny]

Once you reach the minimum 40 credits, it does not make sense to continue to contribute to the social security system if you are not required to. Long-term, you can make better returns investing on your own.

Seems to be very true.

I have the 40 credits already, so just out of curiosity I download the SSA's benefit calculator software from http://www.ssa.gov/OACT/anypia/anypia.html and put my numbers into it and then checked to see what effect on my benefits it would have if I worked next year outside the US and paid nothing into SSA versus worked inside the US and paid the maximum annual amount into SSA (US$6324). Under that scenario the company that I worked for would also be kicking in $6324, making the total contribution $12,648. It looks like paying in that extra $12,648 would cause my benefits to increase by an $300 per year if I started taking payments when I reached 62 years old. Under present rules, that $300 per year would be adjusted for inflation each year, put still it looks much more like a tax than an investment.

You don't say how old you are or how many years you would have to wait to collect that additional $300 per year. However, once you start to collect, it will take over 42 years to recover that $12648 "investment." Even if you only factor in your own contributions ($6348) it would still take more than 21 years. You life expectancy can't be long enough to recoup the entire $12,648.

[OriginalPoster]

Once you reach the minimum 40 credits, it does not make sense to continue to contribute to the social security system if you are not required to. Long-term, you can make better returns investing on your own.

Seems to be very true.

I have the 40 credits already, so just out of curiosity I download the SSA's benefit calculator software from http://www.ssa.gov/OACT/anypia/anypia.html and put my numbers into it and then checked to see what effect on my benefits it would have if I worked next year outside the US and paid nothing into SSA versus worked inside the US and paid the maximum annual amount into SSA (US$6324). Under that scenario the company that I worked for would also be kicking in $6324, making the total contribution $12,648. It looks like paying in that extra $12,648 would cause my benefits to increase by an $300 per year if I started taking payments when I reached 62 years old. Under present rules, that $300 per year would be adjusted for inflation each year, put still it looks much more like a tax than an investment.

You don't say how old you are or how many years you would have to wait to collect that additional $300 per year. However, once you start to collect, it will take over 42 years to recover that $12648 "investment." Even if you only factor in your own contributions ($6348) it would still take more than 21 years. You life expectancy can't be long enough to recoup the entire $12,648.

Data inputed was 48 years old now; start collecting at 62.

[PeaceBlondie]

Gentlemen, you both seem to be making massive math errors, or saying it wrong. Anyway, a consistently high wage earner does not get a fair return on their contributions, because the benefit formula is rigged against them. Folks earning typically high Thai wages, but low wages compared to USA wages, might get a fair return. But in most cases, farang working here would have to be self employed, paying about 15% of their net profit to SECA, which might never be a good investment.

[Hairy]

One of the most likely changes in the immediate future (as in, "first 100 days" of Obama's presidency) is the elimination of the foreign earned income exclusion. IOW, we're almost certain to see expats get taxed at full U.S. rates on all income, with no $90K exclusion.

[OriginalPoster]

Gentlemen, you both seem to be making massive math errors, or saying it wrong.

Why do you say that? What I was trying to say is that by my calculation that if I worked one additional year in the States and if my earnings reached the $102K limit, the 6.2% that I'd pay in FICA tax would entitle me to $300 more per year than if I did not work that year. Are you saying that $300 per year sounds like an extreme overestimate or extreme underestimate?

[JimGant]

If your $6324 only gets you an extra $300 from SS, then you'd certainly be better off investing this elsewhere. Even considering the SS inflation adjustment factor: If inflation is 4%, in 13 years, when you turn 62, SS payout will be approximately $500.

But, if at the end of the year you invest that $6324 in an account earning, say, 4.5% after taxes, in 13 years when you reach age 62, that account will be worth $11207. Using the first immediate pay annuity company I could find on the web, this would equate to an annual $912 tax free (you bought it with after tax dollars).

Compared to SS's $500, up to which 85% is taxable, you've done over twice as well. And, this isn't even factoring in your employer's $6324 share. If you were self-employed, paying the full $12648, you'd be 4 times better off.

[Jingthing]

One of the most likely changes in the immediate future (as in, "first 100 days" of Obama's presidency) is the elimination of the foreign earned income exclusion. IOW, we're almost certain to see expats get taxed at full U.S. rates on all income, with no $90K exclusion.

Where did you hear that one? At Madame Palin's house of tea leaf reading. You have a vivid imagination but I think your fear is paranoid and absurd. Unless of course you can provide a credible source.

[PeaceBlondie]

Gentlemen, you both seem to be making massive math errors, or saying it wrong.

Why do you say that? What I was trying to say is that by my calculation that if I worked one additional year in the States and if my earnings reached the $102K limit, the 6.2% that I'd pay in FICA tax would entitle me to $300 more per year than if I did not work that year. Are you saying that $300 per year sounds like an extreme overestimate or extreme underestimate?

I am wrong. I read it as 300 per month, not per year. Pardon me. Your example did compute 13 years of no work credits from 48 to age 62, did it not?

[JimGant]

When I worked the SS benefits program linked above, I came out with a difference of $660, not the $300 the OP came up with. But, maybe we used different criteria:

I used 1998 through 2007 (the minimum 10 years/ 40 quarters). I checked the "maximum" earnings for each of those years. I then had retirement beginning at age 62, 1 mos, in the year 2022. No further earning past 2007 were projected into the calculation. I arrived at: $808/mo.

When I added an eleventh year (2008) to the above, again checking the "maximum" block (which in 2008 is $102,000, the amt used by the OP), I arrived at $863/mo. This is a $55 mo x 12 = $660/yr. So, by my calculations at least, the $6324 FICA tax you would pay is worth over twice in future benefits than what the OP came up with. And since this figure is in 'now'dollars, if you use a 4% inflation rate for 13 years, this $660 would then be worth $1100. And this, after playing the tax angle *would* be competitive with the $912 annuity arrived at in my post above.

Edited November 9, 2008 by JimGant

[OriginalPoster]

When I worked the SS benefits program linked above, I came out with a difference of $660, not the $300 the OP came up with. But, maybe we used different criteria:

I used 1998 through 2007 (the minimum 10 years/ 40 quarters). I checked the "maximum" earnings for each of those years. I then had retirement beginning at age 62, 1 mos, in the year 2022. No further earning past 2007 were projected into the calculation. I arrived at: $808/mo.

When I added an eleventh year (2008) to the above, again checking the "maximum" block (which in 2008 is $102,000, the amt used by the OP), I arrived at $863/mo. This is a $55 mo x 12 = $660/yr. So, by my calculations at least, the $6324 FICA tax you would pay is worth over twice in future benefits than what the OP came up with. And since this figure is in 'now'dollars, if you use a 4% inflation rate for 13 years, this $660 would then be worth $1100. And this, after playing the tax angle *would* be competitive with the $912 annuity arrived at in my post above.

Try entering earnings back to 1984 instead of only back to 1998 and see what you come up with. I wasn't up to the max contribution in those earlier years, but what my numbers are showing is a benefit of $1396/mo if 2008 is the last year that I contribute into the system and that I'd get $1421/mo if I contibuted in 2009 also. I think that you'll find that the system gives you a poorer return if you have been contributing all of your life rather than just in the last 10 years of your career.

Edited November 9, 2008 by OriginalPoster

[JimGant]

I think that you'll find that the system gives you a poorer return if you have been contributing all of your life rather than just in the last 10 years of your career.

I'm sure you're right: marginal return with SS decreases the longer you've been paying in.

My numbers looked at what one contributer had mentioned: Get your 40 quarters, then go elsewhere, if you can -- at which point, it looks like you'll be breaking even. Stay a lot longer (as your numbers show), and you'll be getting back nickels on every dollar you contribute.

Yes, it's a welfare system. And it will be even more so when the cap is done away with.

[PeaceBlondie]

I think that you'll find that the system gives you a poorer return if you have been contributing all of your life rather than just in the last 10 years of your career.

I'm sure you're right: marginal return with SS decreases the longer you've been paying in.

My numbers looked at what one contributer had mentioned: Get your 40 quarters, then go elsewhere, if you can -- at which point, it looks like you'll be breaking even. Stay a lot longer (as your numbers show), and you'll be getting back nickels on every dollar you contribute.

Yes, it's a welfare system. And it will be even more so when the cap is done away with.

40 years ago, I trained to become a life insurance actuary. Even then, it was obvious that SS pensions were actuarially flawed. It is a pension of sorts, but flawed. It is not welfare, because it is based on your own contributions over a 35 year period. Once you get 40 quarters, forget that and compute 35 years. High wage earners get a very poor return on their contributions, and low wage earners get 90% of their adjusted wages for those 35 years. Nothing will ruin the computation worse than 5 to 15 years of zeros. I am now drawing SS pension based in part on part time wages earned during high school, because many other years were outside the FICA system. My entire SS pension is about 25K baht per month.