Worth getting the US pension?

Hi again guys,
I got a letter from social security stating how much tax I had paid in the US etc.  It wasn't much - maybe about $10k in contributions to social security made as I normally got refunds.

It said that I am about $2k of taxable earnings shy of qualifying for social security retirement benefits when I reach retirement age.

I hadn't planned on working in the US again, but my questions are:

1) Is it even worth it?  Will there even be a social security then and would it give me any benefit?

2) Would the costs of losing my overseas residency status for that year negate any benefit?

3) Can you even collect on social security if you live abroad?

Thank you, I am very confused at all this tax stuff.

Katie

When you ask your other question to whomever PMs you, ask this one as well.

Hi again guys,
I got a letter from social security stating how much tax I had paid in the US etc.  It wasn't much - maybe about $10k in contributions to social security made as I normally got refunds.

It said that I am about $2k of taxable earnings shy of qualifying for social security retirement benefits when I reach retirement age.

I hadn't planned on working in the US again, but my questions are:

1) Is it even worth it?  Will there even be a social security then and would it give me any benefit?

2) Would the costs of losing my overseas residency status for that year negate any benefit?

3) Can you even collect on social security if you live abroad?

Thank you, I am very confused at all this tax stuff.

Katie

I looked into this a bit. The US and UK have a reciprocal SS agreement so that contributions in one country can be used towards the other's plan.

1) I think it will be worth it.
2) don't know
3) Yes definitely

The answers to your question are fairly complex.

1. Under US domestic rules you would not qualify.
2. However this is superceded by the US/UK totalization agreement which states that you will still be entitled to a partial pension.
3. Most economists suggest that the social security fund will run out of money long before we draw our payments.  However this pessimism may be plain wrong!
4. You can collect if you live overseas.  The US embassy in London pays out Social Security to approximately 100,000 folk throughout Europe.

Thanks for the help guys, I really appreciate it.

Does that apply to any country? Because eventually we plan on moving to New Zealand.  But I would assume that it would be the same thing?

Thanks again,
Katie

3. Most economists suggest that the social security fund will run out of money long before we draw our payments.  However this pessimism may be plain wrong!

Plain wrong indeed!!

Most economists in fact are of the opinion that the WORST CASE for the US Social Security system is that they will only be able to pay out 70% of project benefits. So if you were due $1000 you would get $700 a month. Not nice, but not too bad either. The date that this is supposed to happen gets pushed farther and farther into the future each time the look at it. The original date was sometime in 2012, it is now sometime in 2042 or 2047, I don't remember which.

In my opinion the system will NEVER go bust. The worst case scenario described above takes the worst estimate of each factor and many of these are much lower than the historical data from the past 75 years. For example, they project economic growth at something like 1.6% when in reality the 20 year rolling average for the past 75 years is something like 2.8%. That one number alone makes the SS system solvent forever and it is but one of something like 30 different factors that is looked at.

Just my 2 cents.

Plain wrong indeed!!

Well, like all good social programmes, it is a matter of opinion.  There are lots of factors and such large numbers, that I would personally say it would be ill advised for anyone to totally depend on that for retirement income.

I specifically remember the first time I got my information about how many points I had for what I earned to qualify for full benefits.  The letter kindly informed me that Social Security was to run out of money the exact year I was to retire!  Of course, the next year, the kind of information had been removed.

Who is to say what effect a large aging population of retirees who live longer and longer will have on Social Security.  While the economic growth has been large of the past 75 years, it is likely the worker population in 75 years will be very different to the worker population of the future.  People are having less and less children these days making for a large future imbalance of workers to retirees.

With politics being politics, what are the chances that they will raise the age of retirement?  People have a sense of entitlement that hasn't been seen before.  My grandmother still thinks that she is entitled to her money because my grandfather paid in all those years, but doesn't realize that she, being almost 90, has far outlived the money that my grandfather contributed.

I'm just glad I am not an economist !

There are certainly many economists that are very concerned by the US defecit, imbalance in the US balance of trade and levels of US military spendng adding to the US defecit which is being funded by growing borrowings by the United States.

Whether this will lead to recession in the US or indeed long-term effects on social security pensions is difficult to guess.

The UK experience is that the UK governent has frequently reduced actual benefits payable by changing the indexation from wages to price, imposing later deferred retirement ages and attempting (and failing) to privatise part of the State pension.  I am certain that the United States will be forced to create similar restrictions in the future.

Katie would do best to learn about the US/UK and UK/NZ social security agreements to find out what they cover.  So as Kit says what you will receive is tricky to guess - but the social security agreeement may over-ride domestic rules in some cases making the choice even more tricky!