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UK state pension and USA social security

UK state pension and USA social security

Old Apr 21st 2016, 4:44 am
  #1141  
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Default Re: UK state pension and USA social security

Originally Posted by kodokan View Post
Government workers are opted out of paying some/ all? of payroll taxes, which gives the the illusion that their income is lower than it actually was, and that a higher SS payment should be due. Meanwhile, they receive a generous state/ federal pension (maybe in part funded by the payroll taxes they saved? Little hazy on the details). The WEP is designed to stop public sector middle and high earners appearing to be like private sector low earners, and receiving a high 'poor person' SS income AND a full government pension.
Correct. However, there are other ways of calculating benefits that can skew it to the lower paid but avoid "overpaying" those with an incomplete record because of another government pension. If you look at the various "WEP repeal" proposals (I don't have time to right now), you'll see some alternative mechanisms.
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Old Apr 21st 2016, 7:54 am
  #1142  
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Default Re: UK state pension and USA social security

Originally Posted by kodokan View Post
Nice! We're going to be caught up in WEP, so I've taken a small interest in it. And built a spreadsheet; any excuse to build a spreadsheet

It's all swings and roundabouts, global pensions - we'll do well out of making UK voluntary contributions, and VERY well out of a few years spent in Switzerland, thanks to very high salaries/ cost of living there, and therefore getting the benefits of geographical arbitrage of being retired in a lower cost country while receiving our Swiss state pension.
or (with some people) with pensions from countries not as rich as Switzerland but with no reporting so no WEP. (which shows how unfair WEP is)
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Old Apr 21st 2016, 11:10 am
  #1143  
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Default Re: UK state pension and USA social security

Originally Posted by Asg123 View Post
or (with some people) with pensions from countries not as rich as Switzerland but with no reporting so no WEP. (which shows how unfair WEP is)
Do you mean reporting to the IRS? I don't think state pensions do this anywhere, do they, including the UK? I thought it was more of a self-declaration thing when you come to apply for SS; not mentioning another pension would be a monumental cover-up and create tax fraud for many years to come.
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Old Apr 21st 2016, 1:32 pm
  #1144  
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Default Re: UK state pension and USA social security

Originally Posted by kodokan View Post
Government workers are opted out of paying some/ all? of payroll taxes, which gives the the illusion that their income is lower than it actually was, and that a higher SS payment should be due. Meanwhile, they receive a generous state/ federal pension (maybe in part funded by the payroll taxes they saved? Little hazy on the details). The WEP is designed to stop public sector middle and high earners appearing to be like private sector low earners, and receiving a high 'poor person' SS income AND a full government pension.

At least, I think that's what it's all about. Primarily for government workers, and us foreigners just get caught up in the legislation. It's still fair, though - it stops high earners from moving to the US and paying in for 10 years yet receiving a disproportionately high skewed enefit as if they were earning a quarter of their salary, but paying in for 40. The notion is that they have the advantage of having had 30-odd working years somewhere else, and built up retirement provision accordingly.
Some government employers participate in Social Security, some don't, and have their own systems instead. For instance, state employees in Massachusetts (town, school district, county, state) don't pay into SS but have a state retirement system instead. But in New York, state workers participate in Social Security just like employees in any other organisation.

So you're subject to WEP for years you worked as a teacher in MA, but not for years you worked as a teacher in NYS (for instance.)
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Old Apr 21st 2016, 1:36 pm
  #1145  
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Default Re: UK state pension and USA social security

Originally Posted by kodokan View Post
Do you mean reporting to the IRS? I don't think state pensions do this anywhere, do they, including the UK? I thought it was more of a self-declaration thing when you come to apply for SS; not mentioning another pension would be a monumental cover-up and create tax fraud for many years to come.
Yes, it's a good question, does the IRS share with the SS information about the taxpayers who've declared a British State Pension on their tax return?
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Old Apr 21st 2016, 2:50 pm
  #1146  
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Default Re: UK state pension and USA social security

Originally Posted by Giantaxe View Post
The maximum WEP is 50% of non-SS government pension. So that means that your UK pension is at least $400 a month. Add in your US SS and deduct the WEP amount that comes to at least $900 a month. Are you paying that in Medicare premiums? That seems a lot. Or are you having to buy into Medicare because you don't have 40 quarters of SS contributions?

Yes, WEP sucks, although there are arguments on both sides of this.
Originally Posted by Giantaxe View Post
The maximum WEP is 50% of non-SS government pension. So that means that your UK pension is at least $400 a month. Add in your US SS and deduct the WEP amount that comes to at least $900 a month. Are you paying that in Medicare premiums? That seems a lot. Or are you having to buy into Medicare because you don't have 40 quarters of SS contributions?

Yes, WEP sucks, although there are arguments on both sides of this.
Lechtenberg - There is a WEP calculator on the SS.gov site if you want to check their calculations. Also I think the WEP is capped at some point, I need to go back and check but I don't think it is necessarily a loss of 50% of your total pension income. A cap kicks in at some point, though 200 USD off a monthly SS of 700 seems high.
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Old Apr 21st 2016, 3:39 pm
  #1147  
 
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Default Re: UK state pension and USA social security

Originally Posted by Asg123 View Post
or (with some people) with pensions from countries not as rich as Switzerland but with no reporting so no WEP. (which shows how unfair WEP is)
The onus is on the person receiving the foreign pension to report it to social security. Failure to do so comes with penalties.
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Old Apr 21st 2016, 6:54 pm
  #1148  
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Default Re: UK state pension and USA social security

Originally Posted by lansbury View Post
The onus is on the person receiving the foreign pension to report it to social security. Failure to do so comes with penalties.
Only if you get caught
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Old Apr 21st 2016, 7:03 pm
  #1149  
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Default Re: UK state pension and USA social security

Originally Posted by mrken30 View Post
Only if you get caught
How is that different from any other crime?

In an era of rapidly increasing data sharing especially regarding tax evasion and off-shore investments, it would be extremely foolish to assume your overseas secrets will remain secret indefinitely!
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Old Apr 21st 2016, 7:08 pm
  #1150  
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Default Re: UK state pension and USA social security

Originally Posted by mrken30 View Post
Only if you get caught
Are you suggesting applying the same attitude towards reporting income from a foreign pension?
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Old Apr 21st 2016, 7:16 pm
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Default Re: UK state pension and USA social security

Originally Posted by mrken30 View Post
Only if you get caught
I take you have 1st class hons in stating the bleeding obvious.
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Old Apr 21st 2016, 7:26 pm
  #1152  
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Default Re: UK state pension and USA social security

Originally Posted by Giantaxe View Post
Part A no premium, part B $105, part C (optional, anywhere from $40 to $200, part D $10 to $100. Even taking the very maximum of everything that's only $400 in monthly premiums.
If your family income is above certain levels they increase the amount you pay for Medicare. They have increased mine three times. I now pay $538. My beef is that I paid into this system and they have just taken my money under false pretenses
If my husband and I had never worked hard we would be treated better.
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Old Apr 21st 2016, 7:34 pm
  #1153  
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Default Re: UK state pension and USA social security

Originally Posted by Lechtenberg View Post
If your family income is above certain levels they increase the amount you pay for Medicare. They have increased mine three times. I now pay $538.
You have the option of filing taxes as married & separate and your income only will be taken into consideration in determining the part B premium. Additionally, even $538 is not $900+.

Originally Posted by Lechtenberg View Post
My beef is that I paid into this system and they have just taken my money under false pretenses
If my husband and I had never worked hard we would be treated better.
Please explain.

Last edited by Giantaxe; Apr 21st 2016 at 7:48 pm.
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Old Apr 21st 2016, 7:41 pm
  #1154  
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Default Re: UK state pension and USA social security

Originally Posted by Lechtenberg View Post
If your family income is above certain levels they increase the amount you pay for Medicare. They have increased mine three times. I now pay $538. My beef is that I paid into this system and they have just taken my money under false pretenses
If my husband and I had never worked hard we would be treated better.
This is the same for everything related to government. Have extra income, even tax free muni income and it will increase how much of your SS is taxable. Other pensions can reduce your SS because of WEP. Those other pensions are 100% taxable unlike SS. SS itself pays out less as a %tage of taxes to higher earners. The newest best case to look at is the ACA.
This is why you save your own money outside of government and not give them a penny more than you have to. I don't have any plans to do UK NIC contributions ever. They are likely to change the rules to take it away from a guy like me.
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Old Apr 21st 2016, 7:41 pm
  #1155  
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Default Re: UK state pension and USA social security

Originally Posted by Lechtenberg View Post
If your family income is above certain levels they increase the amount you pay for Medicare. They have increased mine three times. I now pay $538. My beef is that I paid into this system and they have just taken my money under false pretenses
If my husband and I had never worked hard we would be treated better.
You have to have a pretty decent income to pay higher premiums:

High income beneficiaries. Retirees with high incomes have been paying bigger Medicare Part B premiums since 2007. Those with retirement incomes between $85,000 and $107,000 ($170,000 to $214,000 for couples) will pay $170.50 in Medicare Part B premiums in 2016. The premium jumps to $243.60 for retirees earning from $107,000 to $160,000 ($214,000 to $320,000 for couples) and $316.70 for those with incomes of $160,000 to $214,000 ($320,000 to $428,000 for couples). People who earn more than $214,000 as an individual or $428,000 as a couple pay $389.80 per month for Medicare Part B. Less than 5 percent of Medicare beneficiaries pay these inflated premiums.
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