Not every older American wants to retire to Florida or Arizona. Some dream of spending their golden years in another country.
Whether you are seeking a new adventure or a lower cost of living, the good news is that with few exceptions, Social Security sends payments regardless of where you live.
“I have a few clients (overseas) who have payments direct deposited into their account without problems,” says Chuck Czajka, certified Social Security claiming strategist and founder of Macro Money Concepts in Stuart, Florida. Those clients include retirees living in Saudi Arabia, France, Italy and the United Kingdom.
Before you retire abroad, here’s what you should know about being an expat and receiving Social Security benefits.
— You should create your my Social Security account before you leave.
— Social Security will not make payments to certain countries.
— Some financial institutions may be better than others.
— Expats may get proof of life forms that must be returned.
— Taxes can get complicated if you live overseas.
You Should Create Your Social Security Account Before You Leave
Earlier this year, the Social Security Administration announced that some beneficiaries may need to visit an office to prove their identity or change their direct deposit information. That could be difficult for those living overseas.
Expats can visit a federal benefits unit run by a U.S. embassy, but those can be few and far between. For instance, there are only two of these units in France, according to Marylouise Serrato, executive director of the organization American Citizens Abroad.
To avoid an in-person visit, people can apply for benefits or change their direct deposit information through an online my Social Security account. To create one of these accounts, beneficiaries must have a Login.gov or ID.me account. These also require identity verification, which, in theory, can be done via video call.
“We’ve had a mixed response to that,” Serrato says. “It has worked for some and not for others.”
To avoid complications, set up your my Social Security account while you are in the United States. It should be easier to do while you are in the country, and then you can use the account to manage your Social Security while overseas.
[Read: How Much Could Trump’s Social Security Pick Impact Your Benefits?]
Social Security Will Not Make Payments to Certain Countries
Social Security payments can be sent to eligible beneficiaries almost anywhere in the world with few exceptions.
The Treasury Department prohibits payments to people residing in Cuba and North Korea. A U.S. resident residing in these countries will receive all their withheld payments once they move elsewhere. Non-U.S. citizens are not eligible to receive any payment for the months they reside in their countries.
The Social Security Administration also says it typically cannot make payments to people in the following countries:
— Azerbaijan
— Belarus
— Kazakhstan
— Kyrgyzstan
— Tajikistan
— Turkmenistan
— Uzbekistan
There may be exceptions, however, and you can talk to a Social Security representative or a federal benefits unit for more information. If you are not eligible for an exception, you will receive all your withheld payments once you move to a country without payment restrictions.
Some Financial Institutions May Be Better Than Others
You’ll also want to select your financial institution carefully. Banks are subject to “know your client” regulations, which may make some wary of holding money for expats. “Sometimes U.S. banks will refuse them an account,” Serrato says.
She recommends using an institution such as the State Department Federal Credit Union, which has extensive experience serving U.S. citizens who live overseas. The credit union is open to Department of State employees and contractors as well as their families and members of affiliated organizations, such as American Citizens Abroad.
While you could have your money directly deposited into a foreign account, this isn’t always ideal.
“The biggest issue that you face is currency exchange issues,” says Magda Szabo, director of tax services for accounting firm Berkowitz Pollack Brant in Miami.
By having money deposited into a U.S. account and then transferred manually, you may be able to time exchanges when rates are more favorable. You may also avoid foreign bank reporting requirements by keeping the bulk of your money in a U.S. bank. “You don’t have to report a foreign account if the accumulated balance is less than $10,000,” according to Szabo.
Using a U.S. bank also ensures you are protected by U.S. regulations. This could become important if you end up owing money that becomes subject to garnishment.
“Here, they can only garnish up to a certain limit,” Czajka says. However, other countries may not have those guardrails. “My concern is that could be a problem.”
Expats May Receive Proof of Life Forms That Must Be Returned
Depending on where you live, you can expect to get a proof of life form from the Social Security Administration every one or two years. Form SSA-7162 asks about income and any changes in residency or citizenship.
“You can’t do this online; we’re not sure why,” Serrato says.
The form will be mailed to the address on file, so be sure to update your Social Security record if you move. Failure to return the form could result in delayed or discontinued payments.
[Related:Retiring Abroad? What Expats Need to Know About Taxes]
Taxes Can Get Complicated if You Live Overseas
“People need to be very aware that leaving the U.S. does not mean leaving your U.S. tax obligations,” Szabo says.
The United States requires all its citizens to pay taxes on their global income. If you exceed certain income thresholds, up to 85% of your Social Security benefits could be taxable. At the same time, you could be required to pay taxes to your new home country if you earn income there. Some countries have tax treaties with the U.S. to avoid double taxation but others don’t.
The bottom line is that taxes can quickly become complicated when you live overseas. It’s smart to work with a professional who is well-versed in international tax law and can ensure you don’t run afoul of both tax laws and foreign asset reporting. Otherwise, “You could wind up making mistakes (that come) with very stiff tax penalties,” Szabo says.
More from U.S. News
Trump Proposed Eliminating Social Security Taxes. Here’s the Bill That Could Make It Happen
How Privatizing Social Security Would Impact Retirees
4 Reasons Your Social Security Payment Is Delayed and What to Do About It
Retiring Abroad? What Expats Should Know About Social Security originally appeared on usnews.com
