Go Back  British Expats > Living & Moving Abroad > Moving back or to the UK
Reload this Page >

Retiring in the UK - US/UK Tax Treaty questions

Retiring in the UK - US/UK Tax Treaty questions

Old Jan 18th 2024, 3:33 pm
  #1  
Just Joined
Thread Starter
 
Joined: Jul 2022
Location: SoCal
Posts: 28
Pierre_Tete is an unknown quantity at this point
Default Retiring in the UK - US/UK Tax Treaty questions

My wife and I are dual UK-USA citizens (both born in the UK). We've been in the US for 30 years and I will be retiring soon. At some point I might like to go back 'home' to the UK (but my wife disagrees... that's a subject for a different thread). To get the full picture of cost of living in the UK I need to figure out taxes and of course for us dual-citizen Americans it's complicated. I have read the UK-USA tax treaty and for retirement income only one thing is clear to me - Social Security/State Pension is taxed only in the country of residence. For the IRS, all my other income seems to be taxable. Ditto for HMRC. We have retirement income sourced from both USA and UK. Which country has the first right to tax which income source, and how is double taxation avoided - by excluding some income declared to IRS or HMRC, or by declaring it all to both (minus SS on the USA side) and claiming a tax credit on the other side, or maybe some other method? For example, I assume the IRS will claim first rights to tax my IRA withdrawals (after all, it went in tax free so I assume the IRS wants its pound of flesh when I take it out), and in doing so, do I then exclude my IRA income on my HMRC tax return, or include it and figure my UK taxes and claim a tax credit for taxes paid to the IRS? For reference our income sources are: US IRA/401k, US interest/dividends/capital gains from a brokerage account, US Social Security, UK State pension, UK company pension.
And a second question.... in the US we file taxes 'Married filing jointly'. The UK does not have an equivalent and everyone is taxed individually with their own personal tax-free allowance, correct? What if all the household income is in the name of one spouse only - the other personal allowance will go unused I assume, resulting in a higher UK tax bill than if income were spread evenly between both spouses? So... if I have a brokerage account in joint names, could I say that all the income generated from that account belongs to my wife, if that helps use up her full personal allowance? Or would I have to split the income from that account 50:50 on our UK tax returns (in which case I assume I could open another brokerage account in her name only and transfer all or most of the assets to it...).
UK-USA taxes for Americans abroad are so complicated it deserves its own forum! (I did write my US rep several times about sponsoring a bill to align the US with the rest of the world by not taxing non-residents, but of course nothing changes....). When I left the UK I called the tax office and they said 'Thanks for letting us know. Good luck, let us know if you ever come back'. Simple. If only that were true of the IRS.
Pierre_Tete is offline  
Old Jan 18th 2024, 4:10 pm
  #2  
SUPER MODERATOR
 
christmasoompa's Avatar
 
Joined: Oct 2007
Location: In a darkened room somewhere.............
Posts: 33,927
christmasoompa has a reputation beyond reputechristmasoompa has a reputation beyond reputechristmasoompa has a reputation beyond reputechristmasoompa has a reputation beyond reputechristmasoompa has a reputation beyond reputechristmasoompa has a reputation beyond reputechristmasoompa has a reputation beyond reputechristmasoompa has a reputation beyond reputechristmasoompa has a reputation beyond reputechristmasoompa has a reputation beyond reputechristmasoompa has a reputation beyond repute
Default Re: Retiring in the UK - US/UK Tax Treaty questions

Originally Posted by Pierre_Tete
And a second question.... in the US we file taxes 'Married filing jointly'. The UK does not have an equivalent and everyone is taxed individually with their own personal tax-free allowance, correct? What if all the household income is in the name of one spouse only - the other personal allowance will go unused I assume, resulting in a higher UK tax bill than if income were spread evenly between both spouses?
The person that doesn't earn income can elect to share some of their personal allowance if their spouse earns under a certain amount - https://www.gov.uk/marriage-allowance

And not sure how old you are, I assume born after 1935, but just in case……..https://www.gov.uk/married-couples-allowance

HTH.
christmasoompa is offline  
Old Jan 19th 2024, 2:48 pm
  #3  
BE Forum Addict
 
Joined: Aug 2013
Location: Eee Bah Gum
Posts: 4,062
durham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond repute
Default Re: Retiring in the UK - US/UK Tax Treaty questions

Originally Posted by Pierre_Tete
My wife and I are dual UK-USA citizens (both born in the UK). We've been in the US for 30 years and I will be retiring soon. At some point I might like to go back 'home' to the UK (but my wife disagrees... that's a subject for a different thread). To get the full picture of cost of living in the UK I need to figure out taxes and of course for us dual-citizen Americans it's complicated. I have read the UK-USA tax treaty and for retirement income only one thing is clear to me - Social Security/State Pension is taxed only in the country of residence. For the IRS, all my other income seems to be taxable. Ditto for HMRC. We have retirement income sourced from both USA and UK. Which country has the first right to tax which income source, and how is double taxation avoided - by excluding some income declared to IRS or HMRC, or by declaring it all to both (minus SS on the USA side) and claiming a tax credit on the other side, or maybe some other method? For example, I assume the IRS will claim first rights to tax my IRA withdrawals (after all, it went in tax free so I assume the IRS wants its pound of flesh when I take it out), and in doing so, do I then exclude my IRA income on my HMRC tax return, or include it and figure my UK taxes and claim a tax credit for taxes paid to the IRS? For reference our income sources are: US IRA/401k, US interest/dividends/capital gains from a brokerage account, US Social Security, UK State pension, UK company pension.
And a second question.... in the US we file taxes 'Married filing jointly'. The UK does not have an equivalent and everyone is taxed individually with their own personal tax-free allowance, correct? What if all the household income is in the name of one spouse only - the other personal allowance will go unused I assume, resulting in a higher UK tax bill than if income were spread evenly between both spouses? So... if I have a brokerage account in joint names, could I say that all the income generated from that account belongs to my wife, if that helps use up her full personal allowance? Or would I have to split the income from that account 50:50 on our UK tax returns (in which case I assume I could open another brokerage account in her name only and transfer all or most of the assets to it...).
UK-USA taxes for Americans abroad are so complicated it deserves its own forum! (I did write my US rep several times about sponsoring a bill to align the US with the rest of the world by not taxing non-residents, but of course nothing changes....). When I left the UK I called the tax office and they said 'Thanks for letting us know. Good luck, let us know if you ever come back'. Simple. If only that were true of the IRS.
Good questions and we were in almost exactly the same situation so this is what we did.

1. I have private pensions in both the USA and UK. Once resident in the UK both the IRS and HMRC taxes them all and I use IRS foreign tax credits to minimize this.

2. Before leaving I converted all our mutual funds to their ETF equivalents because they are “HMRC Reporting “ and attract the lower HMRC rates for dividends and capital gains. With mutual funds all income is taxed as regular income by HMRC. Since my wife has no private pensions and it would be several years before US and UK State pensions she created her own brokerage account and we took my name off the joint accounts. Both HMRC and the IRS tax interest and dividends so we use foreign tax credits. If you have a joint account then HMRC will consider half of that income goes to each person.

3. We had 7 years after retiring at 55 and before moving back so we converted all my IRA and 401k money to a Roth IRA which is tax free in both countries. We then converted her IRA/401k to Roth.

4. We both are receiving UK State pension and it is taxed only in the UK, as is my wife’s SS. (I will start my SS next year at age 70). When filing the IRS return the taxable portion of SS is shown as zero. Since the treaty states that any retirement income that is tax free in one country is also tax free in the other then as well as Roths being tax free, 15% of SS is also tax free in the UK because that would be the case for us if we still resided in the USA

5. Do not invest in “pooled investments “ in the UK such as Stocks and Shares ISAs as they will be considered as PFICs and taxed horrendously by the IRS. The IRS accepts the tax free wrapper around retirement invest accounts but not that of an ISA which is tax free in the UK.

I may have missed some of your points, but there is a lot to consider and the more you can sort out before leaving the US the better you will be.

durham_lad is offline  
Old Jan 20th 2024, 6:53 pm
  #4  
Just Joined
Thread Starter
 
Joined: Jul 2022
Location: SoCal
Posts: 28
Pierre_Tete is an unknown quantity at this point
Default Re: Retiring in the UK - US/UK Tax Treaty questions

Originally Posted by durham_lad
Before leaving I converted all our mutual funds to their ETF equivalents because they are “HMRC Reporting “ and attract the lower HMRC rates for dividends and capital gains. With mutual funds all income is taxed as regular income by HMRC.
This one caught my attention so I researched it. Non-reporting funds will likely be considered as 'Offshore Income Gain' and could be taxed at 45% as far as I can determine. WTF! I've had stock mutual funds in my brokerage account for decades and now I learn that HMRC will consider these funds in the same category as some offshore billionaire tax evader. When did these rules start? I've been putting money in mutual funds in my brokerage account after maxing out my 401k so someday I might afford a modest retirement and now it seems I am shackled to the USA until I can liquidate those funds and buy reporting ETF's. Selling will trigger capital gains tax so I don't want to do that until I have retired and dropped down to the lowest tax band. But this means I can't leave the USA for at least a couple of years into retirement unless I am happy to forfeit 45% of the income from those funds. This is insane. I feel like I will be treated as a tax criminal.
Pierre_Tete is offline  
Old Jan 20th 2024, 7:41 pm
  #5  
Just Joined
Thread Starter
 
Joined: Jul 2022
Location: SoCal
Posts: 28
Pierre_Tete is an unknown quantity at this point
Default Re: Retiring in the UK - US/UK Tax Treaty questions

Originally Posted by durham_lad
I have private pensions in both the USA and UK. Once resident in the UK both the IRS and HMRC taxes them all and I use IRS foreign tax credits to minimize this.
So your approach to reducing or eliminating double taxation is the use of foreign tax credits. I've read others saying the same thing, but here's some more explanation of what I don't understand about the mechanism of how that works....

First, let's simplify and say all my income is taxable by HMRC and all that same income is taxable by the IRS. The first issue is which county has the first claim to tax me? Let's assume it's the county of residence UK. So I add up my worldwide income, compute my UK taxes and pay HMRC. Second, I do that same calculation for the IRS (neglecting the tax year calendar differences for now). Whatever taxes I owe the IRS I subtract a tax credit for what I paid HMRC. I've only done tax credits a few times long ago and I remember they are limited in any single year and unused credits can be rolled over to the subsequent years. IF, and only if, the credits for this year totally eliminate my IRS tax liability then all is good and we are done. BUT if I still end up owing IRS taxes, then this system has not completely eliminated double taxation. So...now the interesting /confusing part. If I paid taxes to IRS, then surely I can claim that as a tax credit for my HMRC taxes? So I go back and recalculate my HMRC taxes subtracting my IRS tax liability as a foreign tax credit and I end up with a lower tax bill to HMRC. Good. But wait..... if I paid less to HMRC then my IRS foreign tax credit will be reduced so I have to go back and recalculate my IRS tax liability again. You can see where this is going..... round and round and round in an endless loop until possibly one side or the other ends up with a zero tax bill but this is not guaranteed. My head is spinning and surely I'm missing something here?

The alternative which ought to be simpler is to only declare income on one side of the equation. We already know SS/State pension is only declared to HMRC and does not appear in the IRS income. So does the tax treaty allow for the IRS to only tax income sourced in the USA, and HMRC to only tax income sourced in the UK (plus SS)? A system like that has no ambiguity or tax credits, but it's certainly not clear to me even after reading the treaty rules.

Pierre_Tete is offline  
Old Jan 20th 2024, 11:29 pm
  #6  
BE Forum Addict
 
Joined: Aug 2013
Location: Eee Bah Gum
Posts: 4,062
durham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond repute
Default Re: Retiring in the UK - US/UK Tax Treaty questions

Originally Posted by Pierre_Tete
This one caught my attention so I researched it. Non-reporting funds will likely be considered as 'Offshore Income Gain' and could be taxed at 45% as far as I can determine. WTF! I've had stock mutual funds in my brokerage account for decades and now I learn that HMRC will consider these funds in the same category as some offshore billionaire tax evader. When did these rules start? I've been putting money in mutual funds in my brokerage account after maxing out my 401k so someday I might afford a modest retirement and now it seems I am shackled to the USA until I can liquidate those funds and buy reporting ETF's. Selling will trigger capital gains tax so I don't want to do that until I have retired and dropped down to the lowest tax band. But this means I can't leave the USA for at least a couple of years into retirement unless I am happy to forfeit 45% of the income from those funds. This is insane. I feel like I will be treated as a tax criminal.

Mutual funds are only taxed as regular income (non-qualified income in IRS terminology). It will only be taxed at 45% if your total income is in the HMRC 45% bracket (over £125,140). Because HMRC have no idea what is inside a mutual fund they tax all income from them as if it were interest from bonds. Funds that are HMRC reporting means that HMRC knows what income is from equity dividends (qualified income in IRS speak) and taxes that at a lower rate.

I had mutual funds that were 100% equity funds, and they had an equivalent ETF so switching from a mutual fund to the brokerage’s ETF meant zero capital tax gains or losses. It is mutual funds that are pooled investments of stocks, bonds and cash that are the issue.

For the opposite situation where you have non-USA funds the IRS will treat them as PFICs and tax the heck out of them because the IRS does not allow foreign funds to report into them and assumes they are all being used as tax havens.
durham_lad is offline  
Old Jan 20th 2024, 11:38 pm
  #7  
BE Forum Addict
 
Joined: Aug 2013
Location: Eee Bah Gum
Posts: 4,062
durham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond repute
Default Re: Retiring in the UK - US/UK Tax Treaty questions

Originally Posted by Pierre_Tete
The alternative which ought to be simpler is to only declare income on one side of the equation. We already know SS/State pension is only declared to HMRC and does not appear in the IRS income. So does the tax treaty allow for the IRS to only tax income sourced in the USA, and HMRC to only tax income sourced in the UK (plus SS)? A system like that has no ambiguity or tax credits, but it's certainly not clear to me even after reading the treaty rules.
No, you can’t do that, welcome to the nightmare that is the fact that the USA is the only country, apart from Eritrea, that taxes its citizens on their worldwide income regardless of where they are living. The tax treaty does help a lot in reducing double taxation but is still a nightmare.


durham_lad is offline  
Old Jan 21st 2024, 8:14 pm
  #8  
Just Joined
Thread Starter
 
Joined: Jul 2022
Location: SoCal
Posts: 28
Pierre_Tete is an unknown quantity at this point
Default Re: Retiring in the UK - US/UK Tax Treaty questions

Originally Posted by durham_lad
No, you can’t do that, welcome to the nightmare that is the fact that the USA is the only country, apart from Eritrea, that taxes its citizens on their worldwide income regardless of where they are living.
Going back a couple of decades I was reluctant to get US citizenship because of this. I only became a citizen because I had a great job but I needed a security clearance. In fact how I came to the US in the first place was almost by accident. I had no intention of coming here originally but a chance meeting lead to an interview and a job offer which I took, intending to stay maybe 5 years. Then kids, school and a job I enjoyed and you know how it goes.... 30 years later I'm still here, but I have never really felt 'at home' and now I'm feeling a bit trapped by the tax consequences and a spouse who doesn't want to go back, but I'm preparing just in case. I appreciate your feedback.
Pierre_Tete is offline  
Old Jan 21st 2024, 9:35 pm
  #9  
BE Forum Addict
 
Joined: Aug 2013
Location: Eee Bah Gum
Posts: 4,062
durham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond repute
Default Re: Retiring in the UK - US/UK Tax Treaty questions

Originally Posted by Pierre_Tete
Going back a couple of decades I was reluctant to get US citizenship because of this. I only became a citizen because I had a great job but I needed a security clearance. In fact how I came to the US in the first place was almost by accident. I had no intention of coming here originally but a chance meeting lead to an interview and a job offer which I took, intending to stay maybe 5 years. Then kids, school and a job I enjoyed and you know how it goes.... 30 years later I'm still here, but I have never really felt 'at home' and now I'm feeling a bit trapped by the tax consequences and a spouse who doesn't want to go back, but I'm preparing just in case. I appreciate your feedback.
You are welcome. Your story sounds very, very similar to mine, a 2 year secondment turned into 5 then turned into 29 years. We also had no idea of the complexity of taxes on USCs and at the time of applying for citizenship we never expected to be moving back. Fortunately my wife was very much in the same mindset about returning and we decided to set up a place in England and split our time between the 2 countries but we had only been back 6 weeks in a rental house when we decided to move back completely. We left a son in Texas and a daughter in California, no grandchildren or much chance of any. A year later our son decided to return back, then 5 years later our daughter and her Australian-American partner. This is our 8th year back and we are still loving it. We had a great time in the USA, no complaints at all but have always maintained very strong ties to family and friends in England Scotland.

durham_lad is offline  
Old Jan 27th 2024, 1:06 pm
  #10  
Just Joined
 
Joined: Dec 2021
Posts: 5
AnotherDaveB is an unknown quantity at this point
Default Re: Retiring in the UK - US/UK Tax Treaty questions

Originally Posted by Pierre_Tete
So your approach to reducing or eliminating double taxation is the use of foreign tax credits. I've read others saying the same thing, but here's some more explanation of what I don't understand about the mechanism of how that works....
Me neither :-). I moved back to the UK in 2022 and I've just filed my first post-return UK tax return, on which FTC make a significant impact. Before this I've always done my own tax returns, but for US 2023 and UK 2022-23 I paid a tax advisor to do it. I still did a copy of my taxes myself, and while my US return was the same, I was way off on the Foreign Tax Credits (FTC) on the UK side.

Originally Posted by Pierre_Tete
The first issue is which county has the first claim to tax me?
It depends. In general, it's the UK, but there are two major exceptions.

Firstly, dividends. The US reserves the right to tax you at 15%, for which you can then claim a credit of on the UK side. So if you are paying 20% in the UK, you can claim 5% FTC towards your US taxes and 15% FTC against the UK. i.e. A ridiculous scenario where FTC theoretically flow in both direction for the same tax. This is where I went wrong on my UK taxes (I presumed the US tax was eliminated by the UK's higher rate, and generally it is except for dividends).

Secondly, you can only claim FTC on things that are taxed in both countries, on taxes that exist in both countries, and within the same 'income basket'. Looking at each of these things in order:

The Double Tax Agreement (DTA) doesn't mention UK ISAs or US HSAs. As such, gains, dividends and interest in these account are taxable in the other country, and you can't use any surplus FTC from other sources to cover them.

Similarly, the UK has no equivalent of the US Net Income Invest Tax (NIIT). So if you're lucky enough to have over about $200,000 (filing single) in capital gains, dividends, interest and rental income, you can't offset the 3.8% NIIT on amounts over that (so yes, when you take the UK's 20% into account, you are in the 23.8% capital gains band).

While the IRS defines seven income baskets, generally we only concern ourselves with the passive and general income baskets. For example, you can't apply FTC from wages against your capital gains or vice versa.

Originally Posted by Pierre_Tete
Second, I do that same calculation for the IRS (neglecting the tax year calendar differences for now). Whatever taxes I owe the IRS I subtract a tax credit for what I paid HMRC.
Just to be clear, you can only claim FTC for taxes that you have physically paid (owing is not enough).

Originally Posted by Pierre_Tete
I've only done tax credits a few times long ago and I remember they are limited in any single year and unused credits can be rolled over to the subsequent years.
1 year back, 10 years forward.

Originally Posted by Pierre_Tete
So...now the interesting /confusing part. If I paid taxes to IRS, then surely I can claim that as a tax credit for my HMRC taxes? So I go back and recalculate my HMRC taxes subtracting my IRS tax liability as a foreign tax credit and I end up with a lower tax bill to HMRC. Good. But wait..... if I paid less to HMRC then my IRS foreign tax credit will be reduced so I have to go back and recalculate my IRS tax liability again. You can see where this is going..... round and round and round in an endless loop until possibly one side or the other ends up with a zero tax bill but this is not guaranteed. My head is spinning and surely I'm missing something here?
It's counter-intuitive, but ignoring the tax year differences can make calculating FTCs harder (and lead to the circular-reference problem you outline). The simplifications are:
  • Use the HRMC Real Time Capital Gains Online reporting portal to pay any UK capital gains taxes as the US tax year in which they arise
    This means the corresponding FTCs are always available to claim against your US tax return, and (ignoring NIIT) will normally zero out the corresponding US capital gain tax.
  • As UK taxes are normally higher than US ones, you typically build up a FTC surplus that carries forward (up to 10 years) that you'll never be able to redeem unless you move to a 3rd country with lower taxes that the US. Typically, your non-capital gains income is similar from year to year, so your FTC for prior years is sufficient to cover any shortfall in taxes due this year verses FTCs generated in that year.
  • Some people just pretend the years align and claim non-capital gains FTCs generated in 2022-23 in their US 2023 tax return, 2023-24 in their US 2024, and so on. I'm not sure that's legal (even though hey often put a line in the comments section saying this is what they've done) and it's not something I personally promote.
Additionally, as a US citizen living abroad, you get an automatic 2 month extension for filing your US return. So if you file your UK taxes really fast, you can do both at the same time! I don't know anyone who does this though. Note that an extension to file is not an extension to pay.

Originally Posted by Pierre_Tete
So does the tax treaty allow for the IRS to only tax income sourced in the USA, and HMRC to only tax income sourced in the UK (plus SS)?.
Short answer, no.
AnotherDaveB is offline  
Old Feb 1st 2024, 7:42 pm
  #11  
Just Joined
 
Joined: Aug 2015
Location: Charlottesville, VA
Posts: 19
jennyjroe has a reputation beyond reputejennyjroe has a reputation beyond reputejennyjroe has a reputation beyond reputejennyjroe has a reputation beyond reputejennyjroe has a reputation beyond reputejennyjroe has a reputation beyond reputejennyjroe has a reputation beyond reputejennyjroe has a reputation beyond reputejennyjroe has a reputation beyond reputejennyjroe has a reputation beyond reputejennyjroe has a reputation beyond repute
Default Re: Retiring in the UK - US/UK Tax Treaty questions

The advice on this site is amazing, but it's too complex for me to get a hold on. I appreciate this is not a "recommendation" site but has anyone here found a trustworthy CFA to help navigate this situation of moving back to the UK? And can they recommend ?

I'm a US green card holder and plan to move back to the UK in 2024, aged 63. I'm interested why Durham_Lad - who retired at 55 - will only draw on the SS in the US at age 70.
I figured - because of the WEP provision - it was better to take the SS sooner rather than later, since WEP will kick in once I claim my UK pension, age 67, resulting in a deduction in SS.

As well as a 401a, I have a 403b in the US, plus UK investments. I need to identify a trustworthy CFA who can help roll these into an IRA that supports overseas customers (or pay a tax attorney to help transfer them back to the UK). I file in the US currently, but I'm assuming if I relinquish my green card (say in 2028 when it expires) I won't need to file tax in both countries, just the UK.

Any help much appreciated.

jennyjroe is offline  
Old Feb 1st 2024, 8:08 pm
  #12  
BE Forum Addict
 
Joined: Aug 2013
Location: Eee Bah Gum
Posts: 4,062
durham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond repute
Default Re: Retiring in the UK - US/UK Tax Treaty questions

My decision to delay SS until age 70 would be the same even if I was staying in the USA. My particular reasons are as follows.

My wife is younger and fitter than me and is drawing her own SS which is much less than mine will be. When I die her SS will be boosted to what mine was.

My SS will be increased by 8%/year above the usual cost of living expenses between full retirement age and age 70.

WEP decreases SS only up to the first “bend point” so any increases in SS above that first bend point are not impacted.

In summary, my delaying SS until age 70 is a type of life insurance for my wife.
durham_lad is offline  
Old Feb 1st 2024, 8:23 pm
  #13  
Just Joined
 
Joined: Aug 2015
Location: Charlottesville, VA
Posts: 19
jennyjroe has a reputation beyond reputejennyjroe has a reputation beyond reputejennyjroe has a reputation beyond reputejennyjroe has a reputation beyond reputejennyjroe has a reputation beyond reputejennyjroe has a reputation beyond reputejennyjroe has a reputation beyond reputejennyjroe has a reputation beyond reputejennyjroe has a reputation beyond reputejennyjroe has a reputation beyond reputejennyjroe has a reputation beyond repute
Default Re: Retiring in the UK - US/UK Tax Treaty questions

Thanks durham_lad, I don't have a spouse alive so there is no point in delaying claiming on my US SS, other than to get the 8% increase / year. I will need the pension income before age 70.
Could you explain how WEP decreases SS only up to the first “bend point”, what is the "bend point" ?
jennyjroe is offline  
Old Feb 1st 2024, 9:36 pm
  #14  
BE Forum Addict
 
Joined: Aug 2013
Location: Eee Bah Gum
Posts: 4,062
durham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond repute
Default Re: Retiring in the UK - US/UK Tax Treaty questions

SS is heavily biased towards the lower earning individuals such that someone earning up $1,174/month would receive 90% of their earnings once they start receiving benefits at full retirement age. This is the so called first bend point. There are 2 other bend points as per the SSA website.

https://www.ssa.gov/oact/cola/piafor...0PIA%20formula.

For an individual who first becomes eligible for old-age insurance benefits or disability insurance benefits in 2024, or who dies in 2024 before becoming eligible for benefits, his/her PIA will be the sum of:
(a) 90 percent of the first $1,174 of his/her average indexed monthly earnings, plus(b) 32 percent of his/her average indexed monthly earnings over $1,174 and through $7,078, plus(c) 15 percent of his/her average indexed monthly earnings over $7,078.


For 2024 the first bend point is $1,724 / month so the amount a person would receive is 90% of that or $1,057 so the the max WEP would be $528/month


durham_lad is offline  
Old Feb 1st 2024, 9:46 pm
  #15  
Just Joined
 
Joined: Aug 2015
Location: Charlottesville, VA
Posts: 19
jennyjroe has a reputation beyond reputejennyjroe has a reputation beyond reputejennyjroe has a reputation beyond reputejennyjroe has a reputation beyond reputejennyjroe has a reputation beyond reputejennyjroe has a reputation beyond reputejennyjroe has a reputation beyond reputejennyjroe has a reputation beyond reputejennyjroe has a reputation beyond reputejennyjroe has a reputation beyond reputejennyjroe has a reputation beyond repute
Default Re: Retiring in the UK - US/UK Tax Treaty questions

Thank you, this is super complicated. I much appreciate your knowledge. To my earlier question, do you know of anyone with this kind of knowledge, a CFA with international experience?
jennyjroe is offline  

Contact Us - Archive - Advertising - Cookie Policy - Privacy Statement - Terms of Service -

Copyright © 2024 MH Sub I, LLC dba Internet Brands. All rights reserved. Use of this site indicates your consent to the Terms of Use.