Social Security and Retiring Overseas

Some people look forward to retirement as an opportunity to live overseas.  It may be a chance to spend some time relaxing on a tropical island in the Caribbean.  Perhaps it is time to open a boutique or restaurant in an exotic location.  Or maybe, retirement is a chance to give back to the community, by performing a service, such as medical care, at low-cost or no charge to people of an impoverished nation.

Whatever the reason, retiring to live overseas may raise a number of legal and financial questions.  Will living overseas affect Social Security benefits? What about working overseas?  Are there tax issues to consider?

For U.S. citizens, the good news is that for the most part, living overseas will not affect your ability to collect Social Security retirement benefits.  Such benefits are contingent on your working for 40 qualifying quarters.  So long as you have those 40 quarters of earnings, and reach the right age, you can collect Social Security retirement benefits.  The payment of benefits to U.S. citizens does not depend on U.S. residency.  You can choose to have those benefits deposited in the United States or to another country, with the exception of Cuba, North Korea, Cambodia, Vietnam or areas that were in the former Soviet Union (other than Armenia, Estonia, Latvia, Lithuania and Russia).

For non-U.S. citizens, otherwise eligible for Social Security benefits, the issue is a little more complicated.  Currently, citizens of List 1 will continue to receive Social Security payments no matter how long they live outside of the United States.  In some other countries, List 2, a citizen may not receive U.S. Social Security benefits if those benefits are based on being a dependent or survivor of the wage earner.  Finally, some countries only permit Social Security payments for the first six months of living outside the United States.  However, if you return to live in the United States for an entire calendar month, payments will resume for another six months when you return to the foreign country. A complete explanation of these rules can be found on the Social Security website, http://www.socialsecurity.gov/pubs/10137.html (“Your Payments While You Are Outside The United States”).

Retiring overseas, therefore, creates some issues with respect to your Social Security benefits.  Before making the decision to retire, you should consult with your financial advisor and your lawyer to see just what impact living and working overseas will have on you and your income.■