Pulaski

I shall wave to the little people from my yacht.

nun

Well all my voluntary NICs were made with money that had SS tax taken out of it, so that might well not be an issue for the UK state pension in many circumstances. There really are lots of arguments and ways to exclude UK state pension from WEP, just not private pensions where the contributions were made form non-SS earnings.

dunroving

Just to put some numeric perspective on this, I looked up the information on the effects of taking SS early, at http://www.ssa.gov/pubs/EN-05-10147.pdf (also attached).

Using the figures in the table, i.e., an assumed SS pension of $1,000 at age 66, I then calculated the effect of taking SS at 62. IF my calculations are correct, I think the following are also true:

Ignoring WEP for the moment, age 77 is the break-even point where cumulative SS is equal (I ignored COLA because it effectively evens out and it's really the percent difference that matters).

Even by age 90, someone taking US SS from age 62 would only be "down", cumulatively, by 13%.

If WEP does apply, the break-even point would be even later (because the early years of SS would not be WEP'ed) and the effect of taking earlier would be even less at age 90.

[I also ignored income tax issues, but these may of course be relevant]

Westham

Well here we go again, reading these recent postings I am again confused, going back to basics I understood that if a person has worked in the USA and has paid in 30 years towards US SS they do not have to worry about WEP? I have recently started receiving my UK pension at 65 which is approx. $500 per 4 weeks, (14 working years + 7 voluntary years) I have a small private pension which is less than 90 GB pounds per month paid into a UK Bank account, my wife receives 60% of my UK pension, she has been receiving her US SS for the past 2 years (taken at 68 years of age she now has 30 years vested) I intend to apply for my US SS when I am 68 which is when I will have 33 years vested. My basic question is are we in the clear from WEP and should I be concerned at my SS interview when declaring my UK Pensions?

dunroving

You're fine - see posts 442 and 444 (included above)

robin1234

I've been thinking it's not worth waiting, bearing in mind the months of income that you lose - permanently - and the uncertainty of actual date of death (the future is unwritten, and all that.) I note that at age 64 and six months you get 90% of your full (age 66) entitlement. For me that is a couple of months time, so I've decided to put in my SS application as soon as I get back from this holiday. That way I'll at least get some months unwepped, since I have a small UK final salary pension starting age 65 and I'm thinking of starting my British state pension at age 66.

(Dunroving, you'll appreciate this. I actually have been trying to kickstart some income from my substantial TIAA-CREF holdings, but those folks are so incompetent they can't even get the relevant papers together and out to me in the mail, bless 'em.)

dunroving

Genetically, males in my family generally don't even reach retirement age, so my plan is to get what I can before the grim reaper wields the big stick. I also am somewhat of a mind that if I do reach my 80's, by then I'll probably be living a very frugal life so a more modest income will be neither here nor there.

I'm surprised at your comment about TIAA-CREF as I thought they had a pretty good reputation.

Having said that, I have a very long story about how I was refused entry to their Charlotte HQ because I had no ID (even though I had pre-arranged an appointment)! They aren't my favourite people at the moment because I am increasingly restricted as to what I can do with my own money (!), purely because I currently live outside the US.

[ETA: Considering the discussion about WEP in this thread, my strategy might be to defer as much of my UK pension as possible and draw down my TIAA-CREF, as this won't affect my WEP. It will depend a lot on the USD exchange rate at the time I retire.]

durham_lad

I think you have an excellent argument in favor of not reporting UK State pension, it would be the same if you made those NI payments into a private deferred annuity, or used some 401k or TSP money to buy an annuity, i.e. not reportable for WEP purposes.

My UK private pensions will take me to the max WEP without the UK State Pension, which for me will be based on 17 years of working in the UK and 10 years of voluntary NI contributions.

Giantaxe

Indeed, the UK pension is way more redistributive than US SS. The other factor to bear in mind is that UK retirees get to use the NHS for "free", whereas US retirees will pay $$ for Medicare through premiums/deductibles etc. Again, the NHS is a lot more redistributive than Medicare is.

dunroving

Exactly ... "Redistributive" I think that's what US politicians call communism (or at least socialism)

[p.s. I think you meant to say "UK" where I bolded ...]

kodokan

We're following an early retirement strategy, and are working on being done and dusted in our early 50s. We'll therefore have 12-15 years of being able to shuffle money about whilst still paying little or no tax, as we'll be living pretty frugally on income derived from our taxable accounts. For some of those years, we'll be drawing down (not closing in one lump) the UK pensions (about $150k total); for others, we'll be doing Roth IRA rollovers; we'll be using Obamacare and balancing income agsinst the subsidies based on 2-4 people in the policy as the kids age out... lots to play with.

The goal is to hit normal retirement age with no UK defined contribution money remaining in the UK or in a pension wrapper, and as much as possible Roth'd over here, then decide when best to pull the trigger in the various small UK company and UK/ US/ Swiss state pensions we'll have coming in from age 65-70. I have a fabulous lifetime spreadsheet running over the next 60 years.

theOAP

Kodokan, that sounds great. You're making all the right moves by establishing a plan now.

I started planning for real only several years before retiring (sooner than I anticipated), made a plan, and stuck to it prior to retiring. Once retired, and with actual figures to work with, I took OAP Inc. seriously and made a spreadsheet inside a spreadsheet, inside a spreadsheet during the first four months of retirement. It's conservative regards spend and pessimistic regards increases in incoming funds. I can pump in a few numbers and run almost any scenario I wish. I retired almost nine years ago.

The good news: so far, my situation today is better than projected for now, nine years ago. Make a realistic plan and stick with it and I can guarantee barring unforeseen difficulties you will have a very enjoyable retirement. In fact, I really don't deserve having it this good, and that's with return on savings below anticipation.

The one thing to look out for is having foreign sources of income from two different countries outside the US (if you haven't unloaded all Swiss and UK sources by then). If you'll still be a US Person at that time, sorting out the US tax return for the first couple of years is an experience, especially if you don't end up living in the US. And, the IRS is no help at all.

kodokan

Thanks, I'm rather pleased with it. We're mid-40s now, and planning to be financially independent once our youngest finishes high school and goes to college (I'm sure there'll then be some tax play mileage around our lack of anything much classed as income, and the FAFSA form...). So I'm currently planning 7-8 years out.

I'm probably over-conservative in my assumptions - I use 4% real return on my stock investments, 0% on cash-like holdings, and we'll never get any pay raises, and that the kids might need a financial hand with rent or something whilst they launch into adulthood, etc. I want to be pleasantly surprised over the long term, not disappointed.

'OAP Inc' - chuckle, we do the same, refer to ourselves as <Familyname> Inc, and think in terms of balance sheets and cashflow. I'm thinking of doing an Accountancy qualification this coming year for fun, because I enjoy tinkering about with the numbers so much. I especially see tax planning as a giant game, both long range and short term; I just snuck in my Jan 2015 mortgage payment today, because we'll be itemising in 2014 but not in 2015.

We're planning to retire in the US (although keeping the option not to, which is one of the reasons for wanting everything possible Roth'd as it's then not taxed regardless of where we're living). The Swiss and UK state pensions are a fixed, unloadable thing we'll just have to work around with the tax returns, along with a couple of final salary schemes we'll have paying out in later life. I expect there's some sort of catch-all 'income from other sources' box it'll all go in that I'll learn how to use nearer the time.

Westham

Thank you for the confirmation

theOAP

If you'll be resident in the US, the US return shouldn't be too difficult. If you'll by chance end up outside the US with all sources of income paid to your country of residence, then I suggest you study for the Accountancy qualification really, really thoroughly, paying particular attention to the use of three different tax treaties in conjunction with each other .