Author Topic: US Citizenship & FIRE/Social Security  (Read 950 times)

ItsALongStory

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US Citizenship & FIRE/Social Security
« on: February 04, 2019, 10:20:05 PM »
hi,

I am a green card holder and have been employed in the US for a number of years, I could get my citizenship but right now I don't see enough reasons to do so.

Current potential benefits of citizenship:
1. I love my home country, am definitely more patriotic/proud than I was when I lived there. I don't want to verbally denounce citizenship to my home land which is de facto required as part of the US naturalization process. I understand that in the eyes of my home country this has no impact (I would still be considered a citizen to the government over there) but it just feels like the wrong thing to do.
2. Hopefully when I reach FI, my (already retired) wife and I can move abroad and live in a lower cost part of the world or slow travel through many of these areas. I am a European citizen so the options over there are plentiful but I wouldn't be opposed to other regions such as in Central or South America either. Asia could be an option as well although that is less appealing due to the humidity and heat. Not being a US Citizen would mean avoiding the tax that each US citizen is subject to as far as their global income so it might offer me more flexibility for geo-arbitrage.
3. As a citizen I would get instant eligibility to unemployment should I lose my job, currently I do not qualify as I have not reached 40 quarters of contributions to SS and came here on a K1 visa. This doesn't feel as valuable as I am not necessarily concerned about my employment status at this time.

Downsides:
1. Lack of voting rights stings, but in all honesty I have not taken full advantage of my voting rights in my home country either so perhaps this shows that this isn't as critical to me.
2. The unemployment piece.

I was wondering what my situation will be if I retire abroad and want to collect SS as a non-citizen. Do I still have the right to SS or will I lose that as I move away? Does it depend on the country? My wife would potentially get taxed but her tax rate is minimal, she is on a government pension and doesn't pay Medicare or SS taxes.

My main questions are really around my decision to hold off on becoming a citizen and the impact this might have on my SS eligibility should I retire abroad.

Thanks in advance!

flipboard

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Re: US Citizenship & FIRE/Social Security
« Reply #1 on: February 04, 2019, 11:05:37 PM »
Without knowing country of citizenship, and where you'd want to retire... it's impossible to answer many of those questions.

For eligibility: you need to check if your country of citizenship and the USA have a totalisation agreement. Likewise, you should also check if (potential) country of residence and the USA have a totalisation agreement. (My country and the USA do have a totalisation agreement, and it helps guarantee that I would get Social Security had I worked in the USA for more than a specific numbers years. Which doesn't apply to me, but could be helpful for you.)

For taxation, you need to check tax laws in the country you'd retire in AND dual taxation agreements between that country and the USA. Most likely the country of residence will tax the full amount as income - depending on dual tax agreement the US might not tax it all, or they might also tax it if there's no agreement.


Then you need to figure out your own dual taxation story: if you are a citizen or green card holder, you'll have the dubious benefit of being taxed by the USA worldwide - which is something to avoid. If you had your green-card long enough (or have citizenship) and have enough assets, you might also have to pay an exit tax when getting rid of the green card/citizenship.

ItsALongStory

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Re: US Citizenship & FIRE/Social Security
« Reply #2 on: February 04, 2019, 11:13:29 PM »
Thanks for your initial response. Let's consider Belgium as my country of citizenship and retirement in Portugal for example.

I figured I could just give up my green card and be relieved of any taxation but that doesn't appear to be the case.

Sent from my Pixel 2 XL using Tapatalk

Edit: looks like exit tax has some reasonably high thresholds so it may not apply if I retire relatively lean but good to keep in mind.
« Last Edit: February 04, 2019, 11:18:22 PM by ItsALongStory »

FI-King_Awesome

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Re: US Citizenship & FIRE/Social Security
« Reply #3 on: February 05, 2019, 12:49:14 AM »
How much are you expecting in terms of income during you years of retirement?  Living abroad you don’t pay taxes on your first 1xxk (don’t remember the exact number).

Also, if part of your income is from qualified dividends, this would be subject to a lower tax rate.

As an American living abroad, I agree with the painful experience that comes with taxation of global income, but it’s a significantly larger problem when working.

Imma

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Re: US Citizenship & FIRE/Social Security
« Reply #4 on: February 05, 2019, 03:40:33 AM »
I can't help you with American SS questions, but don't forget you might also qualify for some social security / state pension / company pension from your home country (depending on where you're from and how long you've lived and worked there). I've seen it happening a few times that people totally forgot about getting state pension from my country when they've lived/worked here for a few years a long time ago.

ROF Expat

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Re: US Citizenship & FIRE/Social Security
« Reply #5 on: February 05, 2019, 04:55:53 AM »
Itsalongstory,

A lot of people on this forum will have pieces of the information you want, but before you make potentially life-changing decisions about citizenship, taxation, and Social Security, you really ought to talk directly to legal experts and the Social Security Administration. 

With that said, here are a few random thoughts: 

--One potential advantage of citizenship you didn't mention is that LPRs can have their status taken away.  Something as simple as a DUI could cause you to lose it. 

--It is my understanding that you do not need to be a citizen to collect SS, and that you do not need to be a citizen or even an LPR to collect it.  Again, you need to confirm this directly for your specific situaiton with SSA, not take the word of a stranger on the internet. 

--If you are an American citizen or an LPR, your Social Security will count as taxable income, subject to normal IRS rules.  If you are residing outside the US, you might be eligible for the Foreign Earned Income Exclusion, but SS won't count as foreign earnings. 

--If your SS is not liable to US tax, you'll want to be sure of its tax status with your country of nationality.  This differs from country to country, but most countries have an aversion to income that isn't taxed somewhere...

--BTW, one other thing to consider is the potential impact of retiring abroad or long periods of slow travel on your LPR status.  It is entirely possible to lose your LPR status if you leave the US for extended periods of time.  If this happens, you could get caught in a situation where it would be hard to come back to the US.  You might not qualify for a visitor visa, and your spouse might have to file a new immigration petition for you if they viewed you as a returning resident rather than a visiting tourist.  Again, I would recommend that you consult with a good immigration lawyer before you make any big decisions.  This obviously wouldn't affect a US citizen. 

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Re: US Citizenship & FIRE/Social Security
« Reply #6 on: February 05, 2019, 12:53:59 PM »

--It is my understanding that you do not need to be a citizen to collect SS, and that you do not need to be a citizen or even an LPR to collect it.  Again, you need to confirm this directly for your specific situaiton with SSA, not take the word of a stranger on the internet. 
The SSA and other countrie's SSA equivalents tend to publish good info online, no need for a stranger.

Here's the SSA's page on the Belgium-USA agreement.
https://www.ssa.gov/international/Agreement_Pamphlets/belgium.html
Along with the actual agreement itself:
https://www.socialsecurity.be/CMS/en/coming_to_belgium/downloads/AWSDhOOQCiRGMx9hIyDJ

(Which seems to confirm that Belgian citizens are SS eligible, regardless of residence.)

Quote
--If you are an American citizen or an LPR, your Social Security will count as taxable income, subject to normal IRS rules.  If you are residing outside the US, you might be eligible for the Foreign Earned Income Exclusion, but SS won't count as foreign earnings. 
But in many cases the Foreign Tax Credit will also be available (and FTC is generlally better for higher tax countries anyway), that does however depend on the wording of dual tax agreements.

The bigger issue is having to file a US tax return every year, along with potentially paying a tax advisor to file it (interactions of tax returns for 2 countries are not pretty, especially if you have to refer to dual-tax agreements). Certainly annoying, potentially costly.
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--If your SS is not liable to US tax, you'll want to be sure of its tax status with your country of nationality.  This differs from country to country, but most countries have an aversion to income that isn't taxed somewhere...
Nationality is irrelevant here (except for US nationality). Country of residence is important, because taxation is performed by residence in most of the world - but they generally aren't "averse" to foreign income, they merely expect you to declare it (and if appropriate pay tax on it), which tends to be a fairly painless process in most countries.

Receiving foreign pensions is a very common things that most countries tax authorities know how to deal with, and are even likely to help you with. OP mentions Portugal, and as Portugal is a popular retirement location they will have no issues whatsoever with such a pension. (IIRC portugal even give some tax-free years for relocating people, I'm not sure if that's still a thing nowadays though.)
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--BTW, one other thing to consider is the potential impact of retiring abroad or long periods of slow travel on your LPR status.  It is entirely possible to lose your LPR status if you leave the US for extended periods of time.  If this happens, you could get caught in a situation where it would be hard to come back to the US.  You might not qualify for a visitor visa, and your spouse might have to file a new immigration petition for you if they viewed you as a returning resident rather than a visiting tourist.  Again, I would recommend that you consult with a good immigration lawyer before you make any big decisions.  This obviously wouldn't affect a US citizen. 
That's why it pays to make a clean break and get rid of the green card - and I know plenty of people who've done that without issues.

Then again, most of the people I know who've gotten rid of their green card happen to have no interest in visiting the US anyway...

ROF Expat

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Re: US Citizenship & FIRE/Social Security
« Reply #7 on: February 05, 2019, 01:38:01 PM »

That's why it pays to make a clean break and get rid of the green card - and I know plenty of people who've done that without issues.

Then again, most of the people I know who've gotten rid of their green card happen to have no interest in visiting the US anyway...
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Flipboard,

You make some very good points, but I don't think I'd go so far as to say it pays to make a clean break and get rid of the green card without a lot of thought.  It really comes down to the OP's circumstances.  Voluntarily giving up a green card might bring some tax advantages, but if OP and spouse ever change their minds about living in the US again, regaining LPR status would be a hassle at the very least.  By the same token, not giving it up and spending a lot of time outside of the US could lead to having LPR status rescinded, which could make it difficult to even get a visitors visa.  If OP and spouse will have family or other connections in the US, they'll want to understand in detail the implications of keeping or giving up, LPR status. 

SKL-HOU

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Re: US Citizenship & FIRE/Social Security
« Reply #8 on: February 05, 2019, 01:43:28 PM »
I am a dual citizen (US and birth country). While the US does not specifically allow for citizenship, they do not NOT allow either. In other words, the only time this would be an issue is if you end up in major trouble for something you have done.

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Re: US Citizenship & FIRE/Social Security
« Reply #9 on: February 07, 2019, 11:08:31 PM »
Another important thing to note is estate tax. If you aren't living in the US, the concept of part of your inheritance going to the US just seems ridiculous.

For now, the exemption limit is high enough that a Firee probably won't care, but changing that limit seems to be a favourite pastime of new legislatures.

(Note: even non-US-citizens/residents can be subject to it, at least on any US securities. Fortunately estate tax agreements often ensure the same limit as for US citizens, but it's something I watch out for...luckily most of us can just switch to IE-domiciled ETF's/Funds to avoid that trap if/when the time comes.)

ItsALongStory

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Re: US Citizenship & FIRE/Social Security
« Reply #10 on: February 07, 2019, 11:29:58 PM »
Thanks all for your thoughtful responses, I'll digest this throughout the weekend to see if I should reconsider my decision.

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Cassie

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Re: US Citizenship & FIRE/Social Security
« Reply #11 on: February 08, 2019, 05:43:58 PM »
My DIL is a Polish citizen and also a US citizen. She is still entitled to all the benefits of her home country.