Paying Into US Social Security as a Thailand Expat

[Stradavarius37]

A question I have tried to find the answer to - but have had little luck is this.

I am a 40 years old US citizen, and have lived in Thailand since 2003. I am employed at a Thailand public university and have filed a US tax return each year since arriving, but have never paid US taxes (Having taken the US "Foreign Earned Income Exclusion" each year). I pay my Thailand taxes every year

I receive a US Social Security statement once a year that shows I have 0 reported income since 2003 and I have 28 earned work credits (40 needed to receive benefits upon reaching retirement age.

What can I do to continue to contribute to US social security to security my benefits in 25-30 years time. When searching I find 1000s of threads on paying out (i.e. recieving benefits as an expat), but few on paying in as an expat. I could use an expert opinion. Thanks!

Edited October 20, 2015 by Stradavarius37

[ricklev]

I'm in a similar situation except that I'm 56. I think you have to declare self-employed income on your return and pay the self-employment tax to earn the SS credits. That's what a friend of mine working in Cambodia did. I'm less concerned with SS than with qualifying for medicare/medicaid.

[lopburi3]

I'm in a similar situation except that I'm 56. I think you have to declare self-employed income on your return and pay the self-employment tax to earn the SS credits. That's what a friend of mine working in Cambodia did. I'm less concerned with SS than with qualifying for medicare/medicaid.

Are you actually planning to return to US in retirement? If not the medicare/medicaid are not really of much value (but is insurance just in case) - good to have a local insurance policy now that can be extended.

[CaptHaddock]

If you have self-employed income or if you were to go to work for a US company in Thailand, you would be able to pay the payroll tax and get your additional quarters. However, as a self-employed person you will be liable for both the employee's and employer's portion of the SS contribution for about 15% including medicare tax. This comes off directly your income from the business, not your modified adjusted gross income. So, it's expensive compared to what you paid as an employee.

If I were in your shoes though I would consider moving back to the US to work after retiring here. Three more years of SS covered earnings would give you the additional twelve quarters you need to get benefits and then you could move back to Thailand for the rest of your retirement if you liked.

The other option would be to marry an American eligible for SS benefits and collect on that person's earnings record.

Edited October 20, 2015 by CaptHaddock

[ricklev]

It is not that bad. You just pay the minimum needed of the self-employment tax to get the quarters you need. However SS payments will be small.

[villagefarang]

I have ended up living here my entire adult life so have never really had any expectation of receiving benefits from my government and enjoy not being stressed by trying to get something from them. The way things are going there is no guarantee you will get out what you put in so it might not be a bad idea to focus on a more self-reliant option, just in case.

[ricklev]

I think it is a pretty safe bet that Medicare isn't going anywhere for many years. Unfortunately, since single payer Medicare for all is the only rational way of providing health care. And I think its good insurance should I need long term care in my old age.

[gk10002000]

You file Schedule SE, and probably schedule C and report income there? Warning. The penalty for LATE payments of FICA seems to be 25%. There was a thread here recently about it. You may owe no income taxes due to income exclusions, deductions, or whatever, FICA may or not be able to be paid by you. The IRS website says: "You cannot make voluntary social security payments if no taxes are due." If you don't declare and file it, of course you don't get any credit for it.

[ricklev]

At least that's what every other developed country in the world concluded.

[CaptHaddock]

I have ended up living here my entire adult life so have never really had any expectation of receiving benefits from my government and enjoy not being stressed by trying to get something from them. The way things are going there is no guarantee you will get out what you put in so it might not be a bad idea to focus on a more self-reliant option, just in case.

The thoughts of a man who doesn't understand the basis of insurance. I think the OP however does grasp the benefits of SS.

[Gonsalviz]

It is my humble opinion that you would be far better off putting your money in an IRA account and telling the government to piss off.

[Misty]

If you have self-employed income or if you were to go to work for a US company in Thailand, you would be able to pay the payroll tax and get your additional quarters. However, as a self-employed person you will be liable for both the employee's and employer's portion of the SS contribution for about 15% including medicare tax. This comes off directly your income from the business, not your modified adjusted gross income. So, it's expensive compared to what you paid as an employee.

If I were in your shoes though I would consider moving back to the US to work after retiring here. Three more years of SS covered earnings would give you the additional twelve quarters you need to get benefits and then you could move back to Thailand for the rest of your retirement if you liked.

The other option would be to marry an American eligible for SS benefits and collect on that person's earnings record.

Agree with CaptHaddock's post. The OP might also find the following link useful:

https://americansabroad.org/issues/social-security/general-information-about-social-security/

Note from the link: "If you are working abroad for a non-US employer, you may not make voluntary contributions to your Social Security account."

The only way you can contribute US SS as an expat would be if you either work for a US employer or if you are truly self-employed and pay self-employment tax. In those cases US SS contributions are mandatory.

[Sheryl]

Agree with CaptHaddock's post. The OP might also find the following link useful:

https://americansabroad.org/issues/social-security/general-information-about-social-security/

Note from the link: "If you are working abroad for a non-US employer, you may not make voluntary contributions to your Social Security account."

The only way you can contribute US SS as an expat would be if you either work for a US employer or if you are truly self-employed and pay self-employment tax. In those cases US SS contributions are mandatory.

+1

And note that when you are self-employed, you have to pay twice what you would as an employee because there is no employer paying the other half. 13% of your income.

To make matters worse, you cannot put the money into an IRA because you have no income subject to taxes. Believe it or not, it is not permitted to contribute to an IRA unless you have taxable income. So while the basic idea of putting the money aside yourself into some sort of retirement account is a good one, it can't be an IRA.

[DogNo1]

An option would be taking out an annuity through a US insurance company. You could probably earn about 3.5% per year in interest. When you annuitize the policy though, you would not be entitled to the FEI exclusion on your accrued interest although you would owe no tax on the principal. It's better than paying the 13% off the top to get SSA as Sheryl mentions. It sounds to me as though you would get the minimum SSA benefit unless you earned a lot during your first 28 quarters. Another option would be starting a portfolio in exclusively income securities and having the 5-6% that you could earn on them reinvested until you retire. See the Income Securities Investor website or LLF Advisors in NYC. Good luck.

[CaptHaddock]

An option would be taking out an annuity through a US insurance company. You could probably earn about 3.5% per year in interest. When you annuitize the policy though, you would not be entitled to the FEI exclusion on your accrued interest although you would owe no tax on the principal. It's better than paying the 13% off the top to get SSA as Sheryl mentions. It sounds to me as though you would get the minimum SSA benefit unless you earned a lot during your first 28 quarters. Another option would be starting a portfolio in exclusively income securities and having the 5-6% that you could earn on them reinvested until you retire. See the Income Securities Investor website or LLF Advisors in NYC. Good luck.

Private annuities are a lot less attractive than the SS annuity, but they are still worth considering since, unlike an investment portfolio, you can't outlive them. The only type of annuity worth considering is the single payment immediate annuity or its cousin, longevity insurance. With an SPIA you pay the total premium today and start receiving a monthly payout beginning next month for life. These annuities are easy to compare and so are priced competitively. With a longevity insurance annuity you pay the total premium today and start receiving the monthly payouts at some time in the distant future, perhaps twenty years from now. Naturally they are a lot cheaper than an SPIA. Longevity insurance came out a few years ago and was not a popular product since few people are willing to wait so long for their return. I think The Hartford may still sell it and some other companies.

[stoli]

An option would be taking out an annuity through a US insurance company. You could probably earn about 3.5% per year in interest. When you annuitize the policy though, you would not be entitled to the FEI exclusion on your accrued interest although you would owe no tax on the principal. It's better than paying the 13% off the top to get SSA as Sheryl mentions. It sounds to me as though you would get the minimum SSA benefit unless you earned a lot during your first 28 quarters. Another option would be starting a portfolio in exclusively income securities and having the 5-6% that you could earn on them reinvested until you retire. See the Income Securities Investor website or LLF Advisors in NYC. Good luck.

There is absolutely no worst investment than an annuity. Stay away from them. They are designed to give huge commissions to Insurance Salespeople, and then for huge profits to the employing company. Only a person with no conscious would sell an annuity to anyone. You will not even get back, over 30 years, the same amount of money that you gave them.

[streetlite]

Is my Thai wife (legal, paper marriage in Thailand) eligible for dependent benefits from SS after I pass away?

[CaptHaddock]

Is my Thai wife (legal, paper marriage in Thailand) eligible for dependent benefits from SS after I pass away?

Probably not, but there is another thread addressing exactly that question that you can search for.

[Misty]

An option would be taking out an annuity through a US insurance company. You could probably earn about 3.5% per year in interest. When you annuitize the policy though, you would not be entitled to the FEI exclusion on your accrued interest although you would owe no tax on the principal. It's better than paying the 13% off the top to get SSA as Sheryl mentions. It sounds to me as though you would get the minimum SSA benefit unless you earned a lot during your first 28 quarters. Another option would be starting a portfolio in exclusively income securities and having the 5-6% that you could earn on them reinvested until you retire. See the Income Securities Investor website or LLF Advisors in NYC. Good luck.

There is absolutely no worst investment than an annuity. Stay away from them. They are designed to give huge commissions to Insurance Salespeople, and then for huge profits to the employing company. Only a person with no conscious would sell an annuity to anyone. You will not even get back, over 30 years, the same amount of money that you gave them.

There are different types of annuities, two main kinds are called either "deferred" or "immediate." Neither kind makes sense for the OP right now, although for different reasons. Deferred annuities, and perhaps especially deferred variable annuities, are almost always a bad deal for the purchaser for a number of reasons. (Google this and you'll find plenty of evidence.) Meanwhile, the OP is too young for the type of annuity that can sometimes make sense for some people (if purchased from a low cost provider like Vanguard) : what's called an immediate fixed income annuity. Besides the fact that he's not yet of retirement age, it's just not a good time in the interest rate cycle to purchase fixed income annuities in general.

OP might consider saving and investing in a regular after tax account, deferring his capital gains as much as possible. At some point in the future, say when he retires, perhaps the interest rate cycle would favour using the funds he's accumulated to purchase an immediate fixed income annuity. My guess is product providers will also be more competitive in what they offer at that point, since there's likely to be a fair amount of demand for such things from an aging population.

[Time Traveller]

If you've lived and worked in a country with an international agreement with the US then you can use that time as part of the 40 credits minimum. (Thailand is not one of them!), so you might actually qualify already. Check it out on the SS website

[BudRight]

You need 40 credits to qualify. You earn one credit for each $1220 in earnings up to four credits per year. For that to be $4,880 (four credits) and 3.5%, 100% would be $140,000. That seems quite expensive, if that's how annuities are priced.

[ricklev]

Declare 5000 dollars.of income on self-employed English teaching. Pay 750 dollars tax. That's 4 credits per year.

[ricklev]

Maybe its not that simple?

[BKKSnowBird]

Keep in mind that you need 40 quarters to get a check when you retire but the amount is based on 35 years of paying in.

If you only have the min 40 quarters; the amount will be very small. Those statments you get assume you will continue to work at a job that pays FICA.

Edited October 25, 2015 by BKKSnowBird

[BKKSnowBird]

Declare 5000 dollars.of income on self-employed English teaching. Pay 750 dollars tax. That's 4 credits per year.

If he works for a university, he is not self employed. He could start a side business just long enough to earn those 12 credits. Edited October 25, 2015 by BKKSnowBird

[ricklev]

Realistically, I don't think any documentation must be submitted when declaring self-employment income at that amount from a foreign country. I could be wrong though.

Edited October 25, 2015 by ricklev

[Pib]

IRS Self-Employed Individuals Tax Center

https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Self-Employed-Individuals-Tax-Center

[CaptHaddock]

Realistically, I don't think any documentation must be submitted when declaring self-employment income at that amount from a foreign country. I could be wrong though.

Nice to be reminded that fraud is always an option.

[ricklev]

Realistically, I don't think any documentation must be submitted when declaring self-employment income at that amount from a foreign country. I could be wrong though.

Nice to be reminded that fraud is always an option.

My conscience is clear.

Edited October 25, 2015 by ricklev