What Happens to Social Security If You Live Abroad Part of the Year?

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The freedom afforded by retirement drives many Americans to live overseas for a portion of the year. Enjoying a lower cost of living, better weather, time with relatives or simply a change of pace are just a few reasons behind this line of thinking. But the fact that you can continue receiving Social Security benefits while living outside the United States may be the most compelling reason of all for some retirees.

Before you hop on the next plane out of the country, however, it’s important to know the differences and potential complications when receiving benefits overseas versus while still living in the U.S. Here’s what you need to know. 

What Does the Law Say?

According to the Social Security Administration (SSA), U.S. citizens can indeed receive Social Security retirement benefits in most countries, even if they live outside the United States for an extended period. 

However, as with anything government-related, there are some exceptions. U.S. Treasury regulations, for example, prohibit benefits being paid if you are in certain countries, like Cuba and North Korea. The SSA provides a country-by-country screening tool to verify whether payments are allowed in your destination, something you should consult before you make your long-term plan.

If you plan to split time between countries, confirm eligibility for the country where you will spend most of the year.

Medicare Doesn’t Usually Cover You Overseas

Although you’ll likely be able to receive your Social Security payments in a foreign country, you can’t usually access Medicare. This is one of the biggest obstacles for many Americans looking to relocate overseas.

The general rule is that Medicare does not cover healthcare outside the United States and its possessions. Here are the few, limited exceptions, per Medicare.gov: 

• You’re in the U.S. when a medical emergency occurs, and the foreign hospital is closer than the nearest U.S. hospital that can treat your medical condition.
• You’re traveling through Canada without unreasonable delay by the most direct route between Alaska and another U.S state when a medical emergency occurs, and the Canadian hospital is closer than the nearest U.S. hospital that can treat the emergency.
• You live in the U.S. and the foreign hospital is closer to your home than the nearest U.S. hospital that can treat your medical condition, regardless of whether an emergency exists.

For these reasons, the government recommends that overseas travelers acquire travel insurance, particularly with a healthcare component if that’s the coverage you need. If you’re planning to live for part of the year or full time in another country, you’ll need to seek separate healthcare coverage there, which will vary in cost depending on the country.

An important caveat to remember is that if you simply drop your Medicare Part B coverage while traveling outside the U.S., you may have to pay late-enrollment penalties if you re-enroll later. As this is an important and potentially costly decision, it’s worthwhile to speak with a financial advisor before you take any actions. 

How Will You Receive Your Benefits?

You can typically receive your Social Security benefits overseas the same way as in the United States, through direct deposit. The SSA’s International Direct Deposit (IDD) program works with dozens of countries, allowing benefits to be deposited into foreign accounts in local currency.

Note that not all countries and banks participate in the program, and processing times can vary. If you retain a bank account in the U.S., one option is to have your payments directed there and then transfer funds overseas as needed.

You Should Expect More Paperwork

Obviously, if you intend to receive your benefits overseas, you’ll have to inform the Social Security Administration. The SSA periodically sends beneficiaries abroad a Foreign Enforcement Questionnaire form, SSA-7162, to confirm eligibility, residence and living status. If you don’t complete and return this form promptly, your benefits may be suspended. 

Here is an additional list of some of the changes you must report to the SSA if you move abroad: 

• Change of address
• Work outside the United States
• Marriage 
• Divorce or annulment 
• Adoption of a child 
• Death 
• Eligibility for a pension from work not covered by Social Security

Complete information can be found in the SSA publication “Your Payments While You Are Outside the United States.”

You Still Owe Taxes

The Internal Revenue Service (IRS) taxes worldwide income, regardless of where you receive it. This applies to taxable Social Security payments as well.

If you earn above certain IRS thresholds, up to 85% of your Social Security income may be taxable. Even worse, according to the SSA, some foreign countries may tax your Social Security benefits as well. Although you can offset these taxes with foreign credits in many cases, take the time to understand both U.S. and foreign tax laws before you commit to living overseas.

The Bottom Line

Living overseas for a portion of the year can be exciting, but remember that U.S. government programs like Social Security may work differently if you’re overseas. Knowing the rules ahead of time can help ensure your benefits continue to arrive in a timely fashion, wherever you decide to spend your golden years. 

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