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UK state pension and USA social security

UK state pension and USA social security

Old Dec 31st 2014, 3:09 pm
  #451  
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Default Re: UK state pension and USA social security

Originally Posted by robin1234 View Post
You're in good shape then and will be able to give the rest of your wealth to the Church, SPCA, alma mater etc., and live off SS & OAP
I shall wave to the little people from my yacht.

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Old Dec 31st 2014, 3:16 pm
  #452  
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Default Re: UK state pension and USA social security

Originally Posted by durham_lad View Post
I think that answering "no" to the question "do you have any pensions from earnings where SS contributions were not paid?<sic.>" would leave me feeling very uncomfortable knowing that I was receiving foreign pensions.
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.
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Old Dec 31st 2014, 3:22 pm
  #453  
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Default Re: UK state pension and USA social security

Originally Posted by dunroving View Post
So, on a slightly different tack, it may be beneficial for some people to take US SS early and delay other pensions? This way, WEP would be delayed and they would maximize the amount of WEP-free US SS they receive?

In fact, if UK state pension is deemed to be WEP-exempt, it would make sense to take US SS early (age 62?), take UK state pension next (at 65 or 66), and then take other, WEP-able pensions ... and maximize cash withdrawals from UK pensions (assuming cash withdrawals aren't classed as a "pension".)

A lot depends on personal circumstances (not least of which are the expected amount from these various pensions, plus the expected WEP %), but as a general principle this has at least some merit, unless I am missing something.
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]
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Old Dec 31st 2014, 4:04 pm
  #454  
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Default Re: UK state pension and USA social security

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?
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Old Dec 31st 2014, 4:08 pm
  #455  
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Default Re: UK state pension and USA social security

Originally Posted by robin1234 View Post
Pulaski, remember that the closer you get to 30 years of substantial SS contributions, the less you have to worry about WEP. I think WEP is progressively phased out for workers with between twenty and thirty years of substantial contributions. And SS have a table online that defines what a substantial contribution is each year.
Originally Posted by Pulaski View Post
Ah yes, thx! I had forgotten about that. I will, all being well, easily pass thirty years of substantial SS contributions.

Aside from the currently unpredictable effect of being contracted out of SERPS during the 1990's I am probably "good to go" with full British state pension and a un-WEP'ed SS.
Originally Posted by Westham View Post
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?
You're fine - see posts 442 and 444 (included above)
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Old Dec 31st 2014, 5:01 pm
  #456  
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Default Re: UK state pension and USA social security

Originally Posted by dunroving View Post
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]
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.)
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Old Dec 31st 2014, 5:08 pm
  #457  
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Default Re: UK state pension and USA social security

Originally Posted by robin1234 View Post
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.)
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.]

Last edited by dunroving; Dec 31st 2014 at 5:13 pm.
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Old Dec 31st 2014, 5:12 pm
  #458  
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Default Re: UK state pension and USA social security

Originally Posted by nun View Post
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.
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.
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Old Dec 31st 2014, 5:15 pm
  #459  
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Default Re: UK state pension and USA social security

Originally Posted by dunroving View Post
As usual, very thorough and helpful in your contributions to the discussion. I have often assumed that US SS would yield a higher "pension" for a middle-earner than would UK state pension (because the US SS pension benefit is earnings-related whereas UK state pension is, broadly-speaking, not).
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.

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Old Dec 31st 2014, 5:22 pm
  #460  
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Default Re: UK state pension and USA social security

Originally Posted by Giantaxe View Post
Indeed, the UK pension is way more redistributive than US SS. The other factor to bear in mind is that US (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.
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 ...]
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Old Dec 31st 2014, 6:21 pm
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Default Re: UK state pension and USA social security

Originally Posted by theOAP View Post
This may be much more applicable to kodokan than dunroving, but it's an interesting thought, under the soon-to-be new UK State pension rules, to withdraw and close out any UK pension, prior to applying for US SS, which would could have adverse effects (WEP) on the US SS.

I have only one consideration. Closing out a pension would equate to taking the pension as a lump sum, and therefore it would have consequences for a US tax return (IF you are a US person). Depending on the size of the payout, it may well bump the taxpayer above unseen thresholds (such as NIIT!). More food for thought, for some.
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.
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Old Dec 31st 2014, 7:49 pm
  #462  
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Default Re: UK state pension and USA social security

Originally Posted by kodokan View Post
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.
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.
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Old Dec 31st 2014, 8:28 pm
  #463  
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Default Re: UK state pension and USA social security

Originally Posted by theOAP View Post
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.
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.

Originally Posted by theOAP View Post
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.
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.
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Old Dec 31st 2014, 8:29 pm
  #464  
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Default Re: UK state pension and USA social security

Originally Posted by dunroving View Post
You're fine - see posts 442 and 444 (included above)
Thank you for the confirmation
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Old Dec 31st 2014, 9:15 pm
  #465  
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Default Re: UK state pension and USA social security

Originally Posted by kodokan View Post
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.
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 .
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